


























. . 

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f 


55tii Congress, 

2d Session. 


SENATE. 


( Document 
i No. 291. 


NICARAGUA CANAL. 


/V3 


In the Senate of the United States, ^ 

June 8, 1S9€. 


Eesolved, That the treaties, known as the Clayton-Bulwer treaty and the Freling- 
huysen-Zavala treaty, relating to a maritime canal in Nicaragua, and the treaty 
between the United States and Nicaragua, relating to such canal, and the conces¬ 
sions of Nicaragua and Costa Rico to A. G. Meuocal and his associates, relating to 
said canal, be printed together as a document for the use of the Senate. 


Attest: 


Wm. R. Cox, Secretary. 


CLAYTON-BULWER TREATY OF APRIL 19, 1850. 

The United States of America and Her Britannic Majesty, being desir¬ 
ous of consolidating the relations of amity which so happily subsist 
between them, by setting forth and fixing in a convention their views 
and intentions with reference to any means of communication by ship- 
canal which may be constructed between the Atlantic and Pacific oceans 
by the way of the river San Juan de Nicaragua and either or both of 
the Lakes of Nicaragua or Managua, to any port or place on the Pacific 
Ocean, the President of the United States has conferred full powers on 
John M. Clayton, Secretary of State of the United States, and Her 
Britannic Majesty on the Right Honorable Sir Henry Lytton Bulwer, a 
member of Her Majesty’s most honorable privy council, knight com¬ 
mander of the most honorable Order of the Bath, and envoy extraordi¬ 
nary and minister plenipotentiary of Her Britannic Majesty to the United 
States, for the aforesaid purpose; and the said plenipotentiaries having 
exchanged their full powers, which were found to be in proper form, 
have agreed to the following articles: 

Article I. 

The Governments of the United States and Great Britain hereby 
declare that neither the one nor the other will ever obtain or maintain 
for itself any exclusive control over the said ship canal; agreeing that 
neither will ever erect or maintain any fortifications commanding the 
same or in the vicinity thereof, or occupy, or fortify, or colonize, or 
assume, or exercise any dominion over Nicaragua, Costa Rica, the Mos¬ 
quito coast, or any part of Central America; nor will either make use 
of any protection which either affords or may afford, or any alliance 
which either has or may have to or with any state or people, for the 
purpose of erecting or maintaining any such fortifications, or of occu¬ 
pying, fortifying, or colonizing Nicaragua, Costa Rica, the Mosquito 
coast, or any part of Central America, or of assuming or exercising 
dominion over the same; nor will the United States or Great Britain 
take advantage of any intimacy, or use any alliance, connection, or 
influence that either may possess with any state or government through 
whose Verritory the said canal may pass, for the purpose of acquiring 
or hold ing, directly or indirectly, for the citizens or subjects of the one, 


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NICARAGUA CANAL. 


2 



any rights or advantages in regard to commerce or navigation through 
the said canal which shall not be offered on the same terms to the citi¬ 
zens or subjects of the other. 

Article II. 


Vessels of the United States or Great Britain traversing the said 
canal shall, in case of war between the contracting parties, be exempted 
from blockade, detention, or capture by either of the belligerents; and 
this provision shall extend to such a distance from the two ends of the 
said canal as may hereafter be found expedient to establish. 

Article III. 

In order to secure the construction of the said canal, the contracting 
parties engage that if any such canal shall be undertaken upon fair and 
equitable terms by any parties having the authority of the local govern¬ 
ment or governments through whose territory the same may pass, then 
the persons employed in making the said canal, and their property used, 
or to be used, for that object, shall be protected, from the commence¬ 
ment of the said canal to its completion, by the Governments of the 
United States and Great Britain, from unjust detention, confiscation, 
seizure, or any violence whatsoever. 

Article IV. 

The contracting parties will use whatever influence they respectively 
exercise with any state, states, or governments, possessing or claiming 
to possess any jurisdiction or right over the territory which the said 
canal shall traverse, or which shall be near the waters applicable thereto, 
in order to induce such states or governments to facilitate the con¬ 
struction of the said canal by every means in their power. And fur¬ 
thermore, the United States and Great Britain agree to use their good 
offices, wherever or however it may be most expedient, in order to pro¬ 
cure the establishment of two free ports, one at each end of the said 
canal. 

Article V. 


The contracting parties further engage, that when the said canal shall 
have been completed, they will protect it from interruption, seizure, or 
unjust confiscation, and that they will guarantee the neutrality thereof, 
so that the said canal may forever be open and free, and the capital in¬ 
vested therein secure. Nevertheless, the Governments of the United 
States and Great Britain, in according their protection to the construc¬ 
tion of the said canal, and guaranteeing its neutrality and security when 
completed, always understand that this protection and guarantee are 
granted conditionally, and may be withdrawn by both governments, or 
either government, if both governments, or either government, should 
deem that the persons or company undertakiug or managing the same 
adopt or establish such regulations concerning the traffic thereupon as 
are contrary to the spirit and intention of this convention, either by 
making unfair discriminations in favor of the commerce of one of the 
contracting parties over the commerce of the other, or by imposing op¬ 
pressive exactions or unreasonable tolls upon passengers, vessels, goods, 
wares, merchandise, or other articles. Neither party, howeve>, shall 
withdraw the aforesaid protection and guarantee without first;giving 
six months’ notice to the other. 


NICARAGUA CANAL. 


3 


* » 

*. in ^ 

Article VI. 

• 

The contracting parties in this convention engage to invite every state 
with which both or either have friendly intercourse to enter into stipula- 
. tions with them similar to those which they have entered into with each 
other, to the end that all other states may share in the honor and advan¬ 
tage of having contributed to a work of such general interest and imper¬ 
il tance as the canal herein contemplated. And the contracting i>arties 
likewise agree that each shall enter into treaty stipulations with such of 
the Central American States as they may deem advisable, for the pur¬ 
pose of more effectually carrying out the great design of this convention, 
namely, that of constructing and maintaining the said canal as a ship 
communication between the two oceans for the benefit of mankind, on 
equal terms to all, and of protecting the same; and they also agree, 
that the good offices of either shall be employed, when requested by the 
other, in aiding and assisting the negotiation of such treaty stipula¬ 
tions; and should any differences arise as to right or property over the 
territory through which the said canal shall pass between the states or 
governments of Central America, and such differences should in any 
way impede or obstruct the execution of the said canal, the Govern¬ 
ments of the United States and Great Britain will use their good offices 
to settle such differences in the manner best suited to promote the 
interests of the said canal, and to strengthen the bonds of friendship 
and alliance which exist between the contracting parties. 

Article VII. 

It being desirable that no time should be unnecessarily los^ in com 
mencing and constructing the said canal, the Governments of the United 
States and Great Britain determine to give their support and encourage¬ 
ment to such persons or company as may first offer to commence the 
same, with the necessary capital, the consent of the local authorities, 
and on such j^rinciples as accord with the spirit and intention of this 
convention; and if any persons or company should already have, with 
any state through which the proposed ship canal may pass, a contract for 
the construction of such a canal as that specified in this convention, to the 
stipulations of which contract neither of the contracting parties in this 
convention have any just cause to object, and the said persons or company 
shall moreover have made preparations, and expended time, money, and 
trouble, on the fai th of such contract, it is hereby agreed that such persons 
or company shall have a priority of claimover every other person, persons, 
or company to the protection of the Governments of the United States 
and Great Britain, and be allowed a year from the date of the exchange 
of the ratifications of this convention for concluding their arrangements, 
and presenting evidence of sufficient capital subscribed to accomplish 
the contemplated undertaking; it being understood that if, at the ex¬ 
piration of the aforesaid period, such persons or company be not able 
to commence and carry out the proposed enterprise, then the Govern¬ 
ments of the United States and Great Britain shall be free to afford 
their protection to any other persons or company that shall be prepared 
to commence and proceed with the construction of the canal in question. 

Article VIII. 

The Governments of the United States and Great Britain having not 
only desired, in entering into this convention, to accomplish a particular 
object, but also to establish a general principle, they hereby agree to 

S. Doc. 26-2 



4 


NICARAGUA CANAL. 


extend tlieir protection, by treaty stipulations, to any other practicable 
communications, whether by canal or railway, across the isthmus which 
connects North and South America, and especially to the iuteroceanic 
communications, should the same prove to be practicable, whether by 
canal or railway, which are now proposed to be established by the way 
of Tehuantepec or Panama. In granting, however, their joint protec¬ 
tion to any such canals or railways as are by this article specified, it is 
always understood by the United States and Great Britain that the 
parties constructing or owning the same shall impose no other charges 
or conditions of traffic thereupon than the aforesaid Governments shall 
approve of as just and equitable; and that the same canals or railways, 
being open to the citizens and subjects of the United States and Great 
Britain on equal terms, shall also be open on like terms to the citizens 
and subjects of every other state which is willing to grant thereto such 
protection as the United States and Great Britain engage to afford. 

Article IX. 

The ratifications of this convention shall be exchanged at Washington 
within six months from this day, or sooner if possible. 

In faith whereoi we, the respective plenipotentiaries, have signed this 
convention, and have hereunto affixed our seals. 

Bone at Washington, the nineteenth day of April, anno Domini one 
thousand eight hundred and fifty. 

John M. Clayton. l. s. 

Henry Lytton Bulwer. |l. s. 


TREATY BETWEEN THE UNITED STATES OF AMERICA AND THE 
REPUBLIC OF NICARAGUA PROVIDING FOR THE CONSTRUC¬ 
TION OF AN INTEROCEANIC CANAL ACROSS THE TERRITORY 
OF NICARAGUA. 

The United States of America and the Kepublic of Nicaragua recog¬ 
nizing the importance of an interoceanic communication across the 
isthmus at Nicaragua which shall bring«into close communication the 
ports of North and South America, and shall facilitate commerce between 
Europe and the ports of the Pacific, between the eastern ports of Asia 
and the Atlantic seaboard, and the ports of the United States on the 
Pacific and Atlantic, have agreed for this purpose to build a canal, and 
to that end to conclude a treaty, and have accordingly named as their 
respective plenipotentiaries the President of the United States, Fred¬ 
erick T. Frelinghuysen, Secretary of State of the United States of 
America, and the President of Nicaragua, General Joaquin Zavala, 
ex-President of the Republic of Nicaragua, who, after communicating 
to each other their full powers, found in due and proper form, have 
agreed upon the following articles: 

Article I. The canal shall be built by the United States of America 
and owned by them and the Republic of Nicaragua, and managed as 
hereinafter provided. 

Article II. There shall be perpetual alliance between the United 
States of America and the Republic of Nicaragua, and the former agree 
to protect the integrity of the territory of the latter. 

Article III. A practicable ship-canal for vessels of the largest size 





NICARAGUA CANAL. 


5 


now commonly used in commerce shall be commenced by the United 
States and be prosecuted to as speedy conclusion as circumstances may 
permit, subject to the limitation provided in Article XX of this con¬ 
vention. This canal shall follow what may be decided to be the most 
available route from ocean to ocean; and the United States in building 
the canal shall enjoy the fullest liberty in its construction, and in its 
location, and that of its dependencies, accessories, and works, as well 
as in the selection of entrance ports. 

Should it be found necessary or desirable to leave the bed of the San 
Juan River at any point and to construct a lateral canal the Govern¬ 
ment of Nicaragua reserves the right to require the establishment of a 
lock communication for vessels of 6 feet draft and 160 feet length, 
between the lower part of the river and that part used for the canal; 
but the Government of Nicaragua will advise the United States of its 
wishes in this regard so soon as work shall be begun in the river, and it 
is expressly stipulated that Nicaragua alone shall be responsible for the 
maintenance and operation of this communication, and for the naviga¬ 
ble condition of the lower river. 

Article IV. For the purpose of carrying out this agreement the 
Republic of Nicaragua agrees to give tbe United States free use of 
Lake Nicaragua, to furnish, free of cost, all the spaces necessary to the 
construction, maintenance, use, and enjoyment of the canal, and for 
any probable future enlargement thereof, whether these spaces be upon 
the dry land, in the lakes and upon their islands, in the rivers and 
upon their islands, or at the ports and roadsteads of the two oceans, 
together with their surroundings and declivities, and all the spaces 
required for the deposit of materials from excavations and cuttings, 
from the overflow arising from dams in the rivers, for all deviations of 
streams from their channels, as well as for reservoirs, dykes, piers, docks, 
spaces about locks, for lights, beacons, storehouses, machine shops, 
buildings, and for whatever other thing necessary, and in short, all 
lauds, waters, and places within the Republic of Nicaragua required for 
the construction, maintenance, use, and business of the canal, including 
a railway, from one terminus of the canal to the other, substantially 
parallel to and near the bank of the canal and along the southern shore 
of Lake Nicaragua, together with a telegraph line, should the United 
States decide to construct either said railway or telegraph line, or both, 
which shall be regarded for all purposes of this treaty as part of the 
canal so long as they are maintained. 

Article V. The work shall be declared one of public utility, and 
for the purposes of building and operating the canal, railway, and tele¬ 
graph line, the Republic of Nicaragua undertakes to expropriate lands 
belonging to individuals. Any private property and real estate actually 
held by individuals or corporations w T hich shall be taken or used by the 
United States for the construction of the canal or its accessories, or for 
their maintenance, shall be so taken upon condemnation and appraise¬ 
ment of the value of such property, and the Government of the United 
States will pay to the owners thereof the value fixed by a commission 
of assessors comprising three members, one of whom shall be appointed 
by the President of the United States, one by the President of Nica¬ 
ragua, and the third to be chosen by these two jointly. 

The United States or the board of managers hereafter provided for, 
as the case may be, shall have the right to take from the public lands 
of Nicaragua any materials whatever needed for the construction, pres¬ 
ervation, maintenance, and use of the canal, and of its ports, depend¬ 
encies, accessories, and equipments. When materials are taken from 


6 


NICARAGUA CANAL. 


private lands, the United States or the said board of managers shall 
enjoy in their use all the rights the Eepublic of Nicaragua enjoys by 
law and usage. 

As to the contract of the Government of Nicaragua with Mr. F. A. 
Pellas, relating to steam navigation, that Government engages that 
the said contract shall not be considered applicable to the necessary 
operations of either jiarty to this convention in constructing or operat¬ 
ing the canal, or any part of it, during the time the contract has yet to 
run, this exemption to include necessary canal work and transpor¬ 
tation on Lake Nicaragua and the rivers of the Eepublic; further, the 
said Government of Nicaragua agrees that should the Government of 
the United States during the period the said contract has yet to run 
find it advisable to purchase the franchise, jiroperty, and rights now 
held by said Pellas by virtue of said contract, the said franchise, prop¬ 
erty, and rights shall be expropriated by the same form and under the 
same conditions as are fixed in this article for the expropriation of other 
private property. 

Should the United States in the construction of the said works find 
it necessary to occupy any lands belonging to the Eepublic, they shall 
have the right to do so free of charge during such temporary occupa¬ 
tion, and the land so occupied, if sold or otherwise alienated, shall be 
conveyed with the reservation of this temporary right of occupation by 
the United States. 

Article VI. The United States shall have the right throughout the 
extent of the canal, and of its accessories, dependencies, and adjuncts, 
as well as at its mouths on both oceans, and in the lake and rivers 
which the canal route may traverse, and that may be used in any man¬ 
ner in connection with the canal construction, to enter upon work of any 
kind whatsoever deemed necessary by the engineers for the construc¬ 
tion of a safe, effective, durable, and speedy route for the transit of 
vessels from ocean to ocean, without let or hindrance of any kind from 
the Government or people of the Eepublic of Nicaragua; and also for 
the construction of the said railway and telegraph line. 

Article VII. A strip of territory 2J English miles in width, the 
middle of this strip to coincide with the center line of the canal, and 
also a strip 2J miles wide around the southern end of the lake where 
the lake is used as a water-course for the canal, as well as a strip 2J 
miles wide along the river where the river is used as a part of the canaf, 
shall be set aside for the work, and owned by the two contracting par¬ 
ties, and where the railway and telegraph line aforesaid may of neces¬ 
sity pass beyond the bounds of such strip of land a plot one-half of a 
mile in width, whose center line shall coincide with the railway outside 
of the belt reserved for the canal, shall also be so set aside and owned. 
And all the land in this article referred to shall be subject to the agree¬ 
ment hereinbefore made as to lands, when owned by the State or by pri¬ 
vate individuals, necessarily used in the prosecution of the work; but the 
said lands in this article described shall not include towns, villages, or 
cities now in existence. In such case only that part shall be considered 
as embraced in this article as is absolutely essential to the economical 
prosecution or administration of the work. Over these strips, in time 
of peace, Nicaragua shall exercise civil jurisdiction, and its inhabitants 
shall not in any way be considered as impaired in their rights as citi¬ 
zens of the Eepublic. 

Article VIII. No custom-house tolls or other taxes or impositions 
of any sort or kind shall be levied by the Government of Nicaragua upon 
any vessels passing the canal, their cargoes, stores, passengers, crews, 


NICARAGUA CANAL. 


7 


or baggage, or for unloading, loading, docking, or repairing vessels, it 
being the intent of this agreement that vessels, their cargoes, passen¬ 
gers, and crews, shall pass the canal free of any charge other than that 
imposed upon them by the two Governments, in their capacities as 
owners of the work. Nicaragua may, however, provide a police system 
along the line of the canal to keep the peace and to prevent smuggling 
into her territory, the reasonable cost of which, as approved from time 
to time by the board of managers, shall be a charge upon the revenues 
of the canal. 

The board of managers shall have the right to discharge and reload 
ships in transit, at such points as may be convenient, in order to make 
repairs, or to lighten the vessel, or to shift cargo, by reason of any cause 
rendering any of these acts necessary, or may transship cargo without 
being subject to search, exactions, duties, or taxes of any kind 5 but 
before beginning such operations notice thereof must be given to the 
nearest customs authority. 

Article IX. The Government of the Eepublic of Nicaragua, in con¬ 
formity with the laws, shall lend its protection to the engineers, con¬ 
tractors, agents, employes, and laborers employed in the construction, 
maintenance, and management of the canal and its accessories, and 
they shall be wholly exempt from military requisitions and forced loans; 
but if any such persons shall acquire real estate outside the strips pro¬ 
vided for in Article VIII hereof they shall be subject to the taxes fixed 
by law. 

The Government of Nicaragua guarantees to the canal and its acces¬ 
sories, and to its agents 01 all classes, security under the laws of the 
country against domestic acts of hostility, in the same degree as in the 
case of other inhabitants, employing all its powers for their protection. 

Article X. All contracts for the construction, maintenance, and 
management of the canal and its accessories may be enforced according 
to the laws of Nicaragua and the provisions of this convention. 

Article XI. The canal and its accessories and dependencies of every 
kind shall be exempt, in peace and in war, from every form of taxation 
upon real or personal property acquired in virtue of this convention, 
and from every form of direct or indirect taxation, contributions, local 
taxes, or other dues in respect to the ownership and use of the canal 
and its accessories, or of the buildings, or constructions, or equipments, 
or apxdiances appertaining thereto, or to the ports and maritime estab¬ 
lishments thereof anywhere in the Eepublic, and upon the lands set 
aside for the purposes of the canal and its accessories. 

The Eepublic of Nicaragua binds itself not to establish tonnage dues, 
anchorage, light, wharf, or pilot dues, or charges of any class whatso¬ 
ever upon vessels of whatever kind, or upon merchandise, or crews, or 
passengers, or gold or silver, or diamonds, or anything traversing the 
canal, all such dues being for the benefit of the two Governments in 
their capacity as joint owners and managers of the canal and its acces¬ 
sories; but merchandise, loaded or unloaded in any part of the canal 
or its accessories, coming from or destined to Nicaragua and intended 
for sale, shall jiay dues for exportation or importation, fixed by the 
revenue laws of Nicaragua. 

Article XII. All articles necessary for the construction and repair 
of the canal and its accessories may be imported without duty or tax of 
any kind being laid thereon by the Government of Nicaragua, including 
such iron, steel, locomotives, cars, telegraph wdres and instruments, tugs, 
dredges, and vessels or other things as may at any time be used in the 
construction; improvement, prosecution or maintenance of the work, or 


8 


NICARAGUA. CANAL. 


in the maintenance or improvement of the same after its completion; 
and during the construction of the canal and its accessories, all supplies, 
whether personal or otherwise, except tobacco, si>irits, or wines, used by 
those engaged in the work, shall be free of any customs or other tax, 
but no such supplies shall be permitted to be sold to those not actually 
engaged in the work, or to be smuggled into or sold in the interior. 

All vessels in the service of the canal and its accessories, with their 
equipments and outfits, arriving at any port of Nicaragua from any 
point whatever, shall be free of all duties and port charges. 

Article XIII. For and in consideration of the preceding articles 
the United States of America agree to furnish the money and to build 
the said canal and its accessories, including, if found advisable, the 
said railway and telegraph line, together with all docks, locks, machine 
shops, repair shops, annexes, machinery, feeders, &c., it' being the 
intent of this agreement that the United States of America shall build 
and complete the canal, with everything appertaining thereto, for the 
safe and speedy passage of the vessels hereinbefore described, and for 
through communication between ocean and ocean, and such loading 
and repairing as may be necessary, at their sole cost and without 
expense to the Government of Nicaragua. 

Article XIV. The United Slates shall have exclusive control of the 
construction of the canal and railway and telegraph line if the same 
be built, and shall be invested with all the rights and powers necessary 
thereto. The management, care, and protection of the canal and its 
accessories, including the said railway and telegraph line if built, under 
the general supervision of the two Governments, shall be entrusted 
to a Board of Managers, which shall consist of six members, three 
of whom shall be appointed by the President of the United States, 
by and with the advice and consent of the Senate thereof, should the 
Senate be in session; or, should the Senate not be in session the three 
members shall be appointed by the President subject to confirmation 
by the Senate at its next session, and three by the Republic of Nicar¬ 
agua. Any vacancy which may occur among the members of the 
Board appointed by the President of the United States shall be filled 
by the said President, in the manner provided in the United States 
for filling vacant government offices, and any vacancy which may occur 
among the members of the Board appointed by the President of Nicar¬ 
agua shall be tilled by the said President in the manner provided in 
Nicaragua for filling vacant government offices. This Board shall be 
designated as soon as the canal is ready for traffic, and shall determine 
all questions by a majority vote. The chairman of the Board shall be 
one of the members appointed by the President of the United States and 
designated as chairman by him, and in case of a tie the chairman shall 
have an additional vote. This Board shall be entrusted with the general 
executive management of the canal and its accessories, including said 
railway and telegraph line when built, and of all matters relating to 
the maintenance or improvement thereof; shall fix the tolls and pro¬ 
vide rules and regulations for the management thereof; their action 
shall be, however, at all times, subject to a joint direction by the Presi¬ 
dents of the two Republics, which they shall be bound to implicitly 
obey. The said Board of Managers shall have the right and power to 
levy and collect for steamers, ships, and vessels of every class entering 
the canal or the ports at the canal entrances, and for passengers, mer¬ 
chandise, and cargo of all kinds, transit, navigation, tonnage, light, and 
port dues, as Avell as for towage, storage, anchorage, wharfage, and 
hospital dues and all other like fees. 


NICARAGUA CANAL. 


9 


The Government of Nicaragua guarantees the enforcement of the 
regulation so adopted by the Board of Managers as if issued by the 
Government of Nicaragua. 

The tolls hereinbefore provided shall be equal as to vessels of the 
parties hereto and of all nations, except that vessels entirely owned and 
commanded by citizens of either one of the parties to this convention 
and engaged in its coasting trade may be favored. 

Nicaraguan vessels, using a portion only of the canal, shall pay pro¬ 
portionate tolls, and shall pay no tolls where the canal shall use any 
part of any existing navigable waterway. 

Article XV. The books and affairs of the said Board of Managers 
shall be subject to such inspection or examination as the President of 
either Republic shall at any time direct. The Board of Managers shall, 
on the first days of January, April, July, and October, in each and 
every year, make to the President of each Republic a full and complete 
report of their transactions during the preceding quarter, and the Pres¬ 
ident of either Republic may, at any time, call upon them for such other 
or further information as he may deem expedient. 

The Board of Managers shall appoint and remove all officers engaged 
upon the canal and its accessories, including the railway and telegraph 
line, and may make regulations for the appointment and removal of all 
subordinate employes. 

Article XVI. All the proceeds of the canal and its accessories, 
including said railway and telegraph line, shall be applied: 

First. To the maintenance and improvement, if found necessary, of 
the works, including the salaries of the Board of Managers and all 
officers and others employed. 

Second. The balance shall be paid to the two Governments in the fol¬ 
lowing proportions, viz, to Nicaragua, one-third, and to the United 
States, two-thirds. 

Liquidation of the accounts of the Board of Managers and payment 
of the balances herein prescribed shall be effected quarterly, on the first 
days of January, April, July, and October in each and every year. 

Article XVII. The Government of Nicaragua grants to the United 
States during the construction of the canal and its accessories, and to 
the Board of Managers thereafter, the right to use any of the ports of 
the Republic open to commerce as places of refuge for the vessels in 
the service of the canal and its accessories, or for any other vessels 
whatever having the right to pass the canal and wishing to anchor in 
said ports, and these vessels shall be free of all dues or charges of any 
kind on the part of the Republic of Nicaragua. 

Article XVIII. The United States frankly disavow any intention 
to in any way seek to impair the independent sovereignty of Nicaragua, 
or to aggrandize themselves at the expense of that State or of any of 
her sister republics in Central America; but, on the contrary, desire to 
strengthen the power of free republics on this continent, and to pro¬ 
mote and develop their prosperity and independence. Pursuant to 
this wish they have united with Nicaragua in the construction of this 
work, which will be of advantage not only to the two nations most 
intimately concerned, but to all those with whom they are on terms of 
friendship. 

Article XIX. If, in virtue of any existing treaty between the Repub¬ 
lic of Nicaragua and a third power, privileges or rights are stipulated 
in favor of such third power in respect of an interoceanic transitway, 
which may not be compatible with the terms of the present convention, 
the Republic of Nicaragua engages to terminate such treaty in due 


10 


NICARAGUA CANAL. 


form by giving to the said third power the stipulated notification within 
two months from the date of the exchange of the ratifications hereof; 
and if such treaty between Nicaragua and any third power contain no 
termination clause, the Republic of Nicaragua engages to procure its 
abrogation or modification so as not to conflict with the present com¬ 
pact, and the United States will use their good offices, if need be, to 
the end of effecting such abrogation or modification. 

Article XX. The United States of America engage to begin effect¬ 
ive work on the canal within two years from the exchange of ratifica¬ 
tions of this treaty, and to complete the canal within ten years after 
beginning it, in default of which this treaty shall become inoperative: 
Provided , however , That should there arise insuperable obstacles to 
retard the work during this term it shall be prolonged in proportion to 
the time lost by reason of such obstacles. And further, if at the expira¬ 
tion of the said ten years the canal shall not be open to commerce 
between the two oceans, then, in consideration of the large capital 
invested in the work and of the good faith and ability shown, as well 
as of the difficulties encountered, the Republic of Nicaragua binds itself 
to extend this period so far as it is just and necessary. 

Article XXI. Any difficulties between the parties hereto shall be 
submitted to the arbitration of a friendly power, if one can be agreed 
upon; or, failing such agreement, each party shall request a friendly 
nation to name an arbitrator, and the arbitrators thus named shall 
select a third. The decision of the arbitrating power, or a majority of 
the Board of Arbitrators, as the case may be, shall be final and con¬ 
clusive. 

Article XXII. The United States will aid by their good offices, if 
desired, in securing the union of the five Central American Republics 
under one representative government, and the reorganization of the 
said Republics in one nationality being accomplished, the Central 
American Republics shall have the same rights and bear the same 
obligations as Nicaragua has and bears by virtue of this treaty. 

Article XXIII. It appearing that the financial condition of Nica¬ 
ragua is prosperous, that the Republic is without incumbrance of debt, 
and that the Government finds it necessary to finish as soon as possible 
certain railways within the Republic, to extend its telegraph line, and to 
improve the navigation of the river San Juan, which enterprises will be 
of aid to the canal and favorable to its speedy construction and success¬ 
ful operation, the Government of the United States agrees to loan to the 
Government of Nicaragua the sum of four millions of dollars to be ap¬ 
plied to the above enumerated projects. Of this amount one million dol¬ 
lars shall be paid in the city of Washington within ninety days after the 
exchange of the ratifications of this convention, and the remaining three 
millions in installments of five hundred thousand dollars each every six 
months thereafter until the whole amount shall have been paid; but a 
failure to pay any of these sums from accident or non action of Congress 
at the exact dates herein specified, such payments being made thereafter 
in good faith, shall not be held as affecting in any way the oth^r engage¬ 
ments of this convention. 

The Government of Nicaragua agrees that the Government of the 
United States shall be credited with and receive the share of Nicaragua 
in the net revenues of the canal to be applied to the payment of this 
loan until it shall have been entirely extinguished with the interest 
thereon at three per centum per annum from the dates when the several 
sums shall be received by Nicaragua, and the Republic of Nicaragua ’ 
may vote yearly through its Congress an additional sum from the gen- 


NICARAGUA CANAL. 11 

eral revenues of the Republic to be applied to the payment of this loan 
and to aid in its speedy extinguishment. 

And further, the Government of Nicaragua, assuming the repayment 
of said loan, binds itself to consider it, until extinguished, together with 
the interest thereon as hereinbefore provided, as a lien upon ail rights 
of Nicaragua in the canal, its accessories and appliances, this lien to 
continue until the repayment of the sum so advanced with the interest; 
but the repayment is not to be exacted until ten years after the said 
canal shall have been completed and opened to commerce. 

Article XXIV. Neither of the parties to this convention shall sell, 
assign, or otherwise alienate or suffer itself to be deprived of, its, or any 
part of its, interest, right, or property in or to the said canal, railway 
or telegraph line, should the same be built, or their or any other adjuncts 
or accessories or any of the works or establishments pertaining thereto 
without the consent of the other manifested by legislative enactment. 

Article XXV. This treaty is concluded subject to ratification by 
the proper constitutional authority of each party hereto and to the 
legislation by the appropriate legislative bodies of each which is nec¬ 
essary to carry it into effect. It shall be ratified as soon as possible, 
but within two years from its date, and the ratifications thereof shall be 
exchanged in the city of Washington within six months from the ap¬ 
proval by the said legislative bodies of Nicaragua and of the United 
States of the present treaty. 

In testimony whereof, the undersigned Plenipotentiaries have here¬ 
unto affixed their hands and seals. 

Done in duplicate, in the English and Spanish languages, in Wash¬ 
ington this 1st day of December in the year of our Lord one thousaud 
eight hundred and eighty-four. 

Fred’k T. Frelinghuysen. [seal. 

Joaq’n Zavala. I seal. 


BY THE PRESIDENT OF THE UNITED STATES OF AMERICA. 

A PROCLAMATION. 

Whereas a treaty of friendship, commerce, and navigation, between 
the United States of America and the Republic of Nicaragua, was con¬ 
cluded and signed by their respective plenipotentiaries, at the city of 
Managua, on the twenty-first day of June, in the year of our Lord one 
thousand eight hundred and sixty-seven, which treaty, being in the 
English and"Spanish languages, is word for word as follows: 

TREATY OF FRIENDSHIP, COMMERCE, AND NAVIGATION, BETWEEN THE 

UNITED STATES OF AMERICA AND THE REPUBLIC OF NICARAGUA. 

The United States of America and the Republic of Nicaragua desiring 
to maintain and to improve the good understanding and the friendly 
relations which now happily exist between them, to promote the com¬ 
merce of their citizens, and to make some mutual arrangement with 
respect to a communication between the Atlantic and Pacific oceans, 
by the river San Juan, and either or both the lakes of Nicaragua and 
Managau, or by any other route through the territories of Nicaragua, 
have agreed for this purpose to conclude a treaty of friendship, com¬ 
merce, and navigation, and have accordingly named as their respective 




12 


NICARAGUA CANAL. 


plenipotentiaries, that is to say : the President of the United States, 
Andrew B. Dickinson, minister resident and extraordinary to Nicara¬ 
gua, and his excellency the President of the Eepublic of Nicaragua, 
Sehor Licenciado Don Tomas Ayon, minister of foreign relations, who, 
after communicating to each other their full powers, found in due ancl 
proper form, have agreed upon the following articles: 

Article 1. 

There shall be perpetual amity between the United States and their 
citizens on the one part, and the government of the Eepublic of Nica¬ 
ragua and its citizens of the other. 

Article II. 

There shall be between all the territories of the United States and 
the territories of the Eepublic of Nicaragua a reciprocal freedom of 
commerce. The subjects and citizens of the two countries, respectively, 
shall have full liberty freely and securely to come with their ships and 
cargoes to all places, ports, and rivers in the territories aforesaid to 
which other foreigners are or may be permitted to come, to enter into 
the same, and to remain and reside in any part thereof, respectively; 
also to hire and occupy houses and warehouses for the purposes of their 
commerce; aud generally the merchants and traders of each nation, 
respectively, shall enjoy the most complete protection and security for 
their commerce, subject always to the laws and statutes of the two 
countries, respectively. In like manner the respective ships of war and 
post-office packets of the two countries shall have liberty freely and 
securely to come to all harbors, rivers, and places to which other foreign 
ships of war and packets are or may be permitted to come, to enter the 
same, to anchor, and to remain there and refit, subject always to the 
laws and statutes of the two countries, respectively. 

By the right of entering places, ports, and rivers, mentioned in this 
article, the privilege of carrying on the coasting trade is not understood; 
in which trade national vessels only of the country where the trade is 
carried on are permitted to engage. 

Article III. 

It being the intention of the two high contracting parties to bind 
themselves by the two preceding articles to treat each other on the foot¬ 
ing of the most favored nations, it is hereby agreed between them that 
any favor, privilege, or immunity whatever, in matters of commerce and 
navigation, which either contracting party has actually granted, or may 
grant hereafter, to the subjects or citizens of any other State, shall be 
extended to the subjects or citizens of the other contracting party 
gratuitously, if the concession in favor of that other nation shall have 
been gratuitous, or in return for a compensation, as nearly as possible 
of a proportionate value and effect, to be adjusted by mutual agreement, 
if the concession shall have been conditional. 

Article IV. 

No higher or other duties shall be imposed on the importation into 
the territories of the United States of any article being the growth, 
produce, or manufacture of the republic of Nicaragua, and no higher 


NICARAGUA CANAL. 


13 


or other duties shall be imposed on the importation into the territories 
of the republic of Nicaragua of any article being the growth, produce, 
or manufacture of the United States, than are or shall be payable upon 
the like articles being the growth, produce, or manufacture of any other 
foreign country; nor shall any other or higher duties or charges be 
imposed in the territories of either of the high contracting parties on 
the exportation of any articles to the territories of the other than such 
as are or may be payable on the exportation of the like articles to any 
other foreign country; nor shall any prohibition be imposed upon the 
importation or exportation of any articles the growth, produce, or manu¬ 
facture of the territories of the United States or the republic of Nica¬ 
ragua to or from the said territories of the United States, or to or from 
the republic of Nicaragua, which shall not equally extend to all other 
nations. 

Article V. 

No higher or other duties or payments on account of tonnage, of 
light or harbor dues, or pilotage, of salvage in case of either damage or 
shipwreck, or on account of any local charges, shall be imposed in any 
of the ports of Nicaragua on vessels of the United States than those 
payable by Nicaraguan vessels, nor in any of the ports of the United 
States on Nicaraguan vessels than shall be payable in the same ports 
on vessels of the United States. 

Article VI. 

The same duties shall be paid on the importation into the territories 
of the republic of Nicaragua of any article being the growth, produce, 
or manufacture of the territories of the United States, whether such 
importation shall be made in Nicaraguan vessels or in the vessels of 
the United States; and the same duties shall be paid on the importa¬ 
tion into the territories of the United States of any article being the 
growth, produce, or manufacture of the republic of Nicaragua, whether 
such importation shall be made in Nicaraguan or United States vessels. 
The same duties shall be paid, and the same bounties and drawbacks 
allowed, on the exportation to the republic of Nicaragua of any article 
being being the growth, produce, or manufacture of the territories of 
the United States, whether such exportation shall be made in Nicara¬ 
guan or United States vessels; and the same duties shall be paid, and 
the same bounties and drawbacks allowed, on the exportation of any 
articles being the growth, produce, or manufacture of the republic of 
Nicaragua to the territories of the United States, whether such expor¬ 
tations shall be made in the vessels of the United States or of Nicaragua. 

Article VII. 

All merchants, commanders of ships, and others, citizens of the United 
States, shall have full liberty in all the territories of the republic of 
Nicaragua to manage their own affairs themselves, as permitted by the 
laws, or to commit them to the management of whomsoever they please, 
as broker, factor, agent, or interpreter; nor shall they be obliged to 
employ any other persons in those capacities than those employed by 
Nicaraguans, nor pay them any other salary or remuneration than such 
as is paid in like cases by Nicaraguan citizens; and absolute freedom 
shall be allowed in all cases to the buyer and seller to bargain and fix 
the price of any goods, wares, or merchandise imported into or exported 


14 


NICARAGUA CANAL. 


from the republic of Nicaragua as they shall see good, observing the 
laws and established custom of the country. 

The same privileges shall be enjoyed in the territories of the United 
States by the citizens of the republic of Nicaragua under the same con¬ 
ditions. 

Tbe citizens of the high contracting parties shall reciprocally receive 
and enjoy full and perfect protection for their persons and property, and 
shall have free and open access to the courts of justice in said country, 
respectively, for the prosecution and defense of their just rights; and 
they shall be a liberty to employ, in all cases, advocates, attorneys, or 
agents, of whatsoever description, whom they may think proper; and 
they shall enjoy, in this respect, the same rights and privileges therein 
as native citizens. 

Article VIII. 

In whatever relates to the police of the ports, the lading and unlading 
of ships, the safety of merchandise, goods, and effects, the succession 
to personal estates, by will or otherwise, and the disposal of personal 
property of every sort and denomination, by sale, donation, exchange, 
testament, or any other manner whatsoever, as also the administration 
of justice, the citizens of the two high contracting parties shall recip¬ 
rocally enjoy the same privileges, liberties, and rights as native citizens; 
and they shall not be charged in any of these respects with any higher 
imposts or duties than those which are or may be paid by native citi¬ 
zens, submitting, of course, to the local laws and regulations of each 
country, respectively. 

The foregoing provisions shall be applicable to real estate situated - 
within the States of the American Union, or within the republic of 
Nicaragua, in which foreigners shall be entitled to hold or inherit real 
estate. But in case real estate situated within the territories of one 
of the contracting x^arties should fall to a citizen of the other i)arty, 
who, on account of his being an alien, could not be permitted to hold 
such property in the State in which it may he situated, there shall be 
accorded to the said heir, or other successor, such time as the laws of 
the State will permit to sell such x>roperty. He shall be at liberty, at 
all times, to withdraw and export the x>roceeds thereof without diffi¬ 
culty, and without paying to the government any other charges than 
those which would be x^aid by an inhabitant of the country in which 
the real estate may be situated. 

If any citizen of the two high contracting forties shall die without 
a will or testament in any of the territories of the other, the minister 
or consul, or other diplomatic agent, of the nation to which the deceased 
belonged (or the rex>resentative of such minister or consul, or other 
dixdomatic agent, in case of absence), shall have the right to nominate 
curators to take charge of the x>rox>erty of the deceased, so far as the 
laws of the country will x>ermit, for the benefit of the lawful heirs and 
creditors of the deceased, giving proper notice of such nomination to 
the authorities of the country. 

Article IX. 

1. The citizens of the United States residing in Nicaragua, or the 
citizens of Nicaragua residing in the United States, may intermarry 
with the natives of the country; hold and possess, by xmrchase, mar¬ 
riage, or descent, any estate, real or personal, without thereby changing 


NICARAGUA CANAL. 15 

their national character, subject to the laws which now exist or may 
be enacted in this respect. 

2 . The citizens of the United States residents in the Republic of 
Nicaragua, and the citizens of Nicaragua residents in the United States, 
shall be exempted from all forced or compulsory military service what¬ 
soever, by land or sea; from all contributions of war, military exactions, 
forced loans in time of war; but they shall be obliged, in the same 
manner as the citizens of each nation, to pay lawful taxes, municipal 
and other modes of imposts, and ordinary charges, loans, and contri¬ 
butions in time of peace (as the citizens of the country are liable), in 
just proportion to the property owned. 

3. Nor shall the property of either, of any kind, be taken for any 
public object without full and just compensation to be paid in advance"; 
and 

4. The citizens of the two high contracting parties shall have the 
unlimited right to go to any part of the territories of the other, and in 
all cases enjoy the same security as the natives of the country where 
they reside, with the condition that they duly observe the laws and 
ordinances. 

Article X. 

It shall be free for each of the two high contracting parties to appoint 
consuls for the protection of trade, to reside in any of the territories of 
the other party. But before any consul shall act as such he shall, in 
the usual form, be approved and admitted by the government to which 
he is sent; and either of the high contracting parties may except from 
the residence of consuls such particular places as they judge fit to be 
excepted. 

The diplomatic agents of Nicaragua and consuls shall enjoy in the 
territories of the United States whatever privileges, exemptions, and 
immunities are or shall be allowed to the agents of the same rank 
belonging to the most favored nations; and in the like manner the dip¬ 
lomatic agents and consuls of the United States in Nicaragua shall 
enjoy, according to the strictest reciprocity, whatever privileges, exemp¬ 
tions, and immunities are or may be granted in the Republic of Nicar¬ 
agua to the diplomatic agents and consuls of the most favored nations. 

Article XI. 

For the better security of commerce between the citizens of the 
United States and the citizens of Nicaragua, it is agreed, that if at any 
time any interruption of friendly intercourse, or any rupture, should 
unfortunately take place between the two high contracting parties, the 
citizens of either, who maybe within the territories of the other, shall, 
if residing on the coast, be allowed six months, and if in the interior, a 
whole year, to wind up their accounts, and dispose of their property; 
and a safe-conduct shall be given to them to embark at any port they 
themselves may select. Even in case of rupture, all such citizens of 
either of the high contracting parties, who are established in any of the 
territories of the other in trade or other employment, shall have the 
privilege of remaining and of continuing such trade or employment, 
without any manner of interruption, in the full enjoyment of liberty and 
property, so long as they behave peacefully, and commit no offence 
against the laws; and their goods and effects, of whatever description 
they may be, whether in their own custody, or intrusted to individuals 


16 


NICARAGUA CANAL. 


or to the State, shall not be liable to seizure or sequestration, nor to 
any other charges or demands than those which may be made upon the 
like effects or property belonging to the native citizens of the country 
in which such citizens may reside. In the same case, debts between 
individuals, property in public funds, and shares of companies, shall 
never be confiscated, nor detained, nor sequestered. 

Article XII. 

The citizens of the United States and the citizens of the Republic of 
Nicaragua, respectively, residing in any of the territories of the other 
party, shall enjoy in their houses, persons, and property, the protection 
of the Government, and shall continue in possession of the guarantees 
which they now enjoy. They shall not be disturbed, molested, or 
annoyed in any manner on account of their religious belief, nor in the 
proper exercise of their religion, agreeably to the system of tolerance 
established in the territories of the high contracting parties, provided 
they respect the religion of the nation in which they reside, as well as 
the constitution, laws, and customs of the country. 

Liberty shall also be granted to bury the citizens of either of the two 
high contracting parties, who may die in the territories aforesaid, in 
burial places of their own, which in the same manner may be freely 
established and maintained; nor shall the funerals or sepulchres of the 
dead be disturbed in any way or upon any account. 

Article XIII. 

Whenever a citizen of either of the contracting parties shall be forced 
to seek refuge or asylum in the rivers, bays, ports, or dominions of the 
other with their vessels, whether merchant or war, jiublic or private, 
through stress of weather, pursuit of pirates or enemies, or want of pro¬ 
visions or water, they shall be received and treated with humanity, and 
given all favor and protection for repairing their vessels, procuring 
provisions, and placing themselves in all respects in a condition to con¬ 
tinue their voyage without obstacle of any kind. 

Article XIV. 

The Republic of Nicaragua hereby grants to the United States, and 
to their citizens and property, the right of transit between the Atlantic 
and Pacific oceans through the territory of that Republic, on any route 
of communication, natural or artificial, whether by land or by water, 
which may now or hereafter exist or be constructed under the authority 
of Nicaragua, to be used and enjoyed in the same manner and upon 
equal terms by both Republics and their respective citizens, the Repub¬ 
lic of Nicaragua, however, reserving its rights of sovereignty over the 
same. 

Article XV. 

The United States hereby agree to extend their protection to all such 
routes of communication as aforesaid, and to guarantee the neutrality 
and innocent use of the same. They also agree to employ their influ¬ 
ence with other nations to induce them to guarantee such neutrality 
and protection. 

And the Republic of Nicaragua, on its part, undertakes to establish 
one free port at each extremity of one of the aforesaid routes of com- 


NICARAGUA CANAL. 


17 


munication between the Atlantic and Pacific oceans. At these ports 
no tonnage or other duties shall be imposed or levied by the Govern¬ 
ment of Nicaragua on the vessels of the United States, or on any effects 
or merchandise belonging to citizens or subjects of the United States, 
or upon the vessels or effects of any other country intended, bona fide, 
for transit across the said routes of communication, and not for con¬ 
sumption within the Republic of Nicaragua. The United States shall 
also be at liberty, on giving notice to the Government or authorities of 
Nicaragua, to carry troops and munitions of war in their own vessels, 
or otherwise, to either of said free ports, and shall be entitled to their 
conveyance between them without obstruction by said Government or 
authorities, and without any charges or tolls whatever for their trans¬ 
portation on either of said routes: Provided , Said troops and munitions 
of war are not intended to be employed against Central American 
nations friendly to Nicaragua. And no higher or other charges or tolls 
shall be imposed on the conveyance or transit of persons and property 
of citizens or subjects of the United States, or of any other country, 
across the said routes of communication, than are or may be imposed 
on the persons and property of citizens of Nicaragua. 

And the Republic of Nicaragua concedes the right of the Postmaster- 
General of the United States to enter into contracts with any individ¬ 
uals or companies to transport the mails of the United States along 
the said routes of communication, or along any other routes across the 
isthmus, in its discretion, in closed bags, the contents of which may not 
be intended for distribution within the said Republic, free from the im¬ 
position of all taxes or duties by the Government of Nicaragua; but 
this liberty is not to be construed so as to permit such individuals or 
companies, by virtue of this right to transport the mails, to carry also 
passengers or freight. 

Article XVI. 

The Republic of Nicaragua agrees that, should it become necessary 
at any time to employ military forces for the security and protection of 
persons and property passing over any of the routes aforesaid, it will 
employ the requisite force for that purpose; but upon failure to do this 
from any cause whatever, the Government of the United States may, 
with the consent or at the request of the Government of Nicaragua, or 
of the minister thereof at Washington, or of the competent legally 
appointed local authorities, civil or military, employ such force for this 
and for no other purpose; and when, in the opinion of the Government 
of Nicaragua, the necessity ceases, such force shall be immediately 
withdrawn. 

In the exceptional case, however, of unforeseen or imminent danger 
to the lives or property of citizens of the United States, the forces of 
said Republic are authorized to act for their protection without such 
consent having been previously obtained. 

But no duty or power imposed upon or conceded to the United States 
by the provisions of this article shall be performed or exercised except 
by authority and in pursuance of laws of Congress hereafter enacted. 
It being understood that such laws shall not affect the protection and 
guarantee of the neutrality of the routes of transit, nor the obligation 
to withdraw the troops which may be disembarked in Nicaragua 
directly that, in the judgment of the Government of the Republic, they 
should no longer be necessary, nor in any manner bring about new 
obligations on Nicaragua, nor alter her rights in virtue of the present 
treaty. 

S. Doc. 291-2 



18 


NICARAGUA CANAL. 


Article XVII. 

It is understood, however, that the United States, in according pro¬ 
tection to such routes of communication, and guaranteeing their neu¬ 
trality and security, always intend that the protection and guarantee 
are granted conditionally, and may be withdrawn if the United States 
should deem that the persons or company undertaking or managing 
the same adopt or establish such regulations concerning the traffic 
thereupon as are contrary to the spirit and intention of this treaty, 
either by making unfair discriminations in favor of the commerce of any 
country or countries over the commerce of any other country or 
countries, or by imposing oppressive exactions or unreasonable tolls 
upon mails, passengers, vessels, goods, wares, merchandise, or other 
articles. The aforesaid protection and guarantee shall not, however, 
be withdrawn by the United States without first giving six months’ 
notice to the Republic of Nicaragua. 

Article XVIII. 

And it is further agreed and understood that in any grants or con¬ 
tracts which may hereafter be made or entered into by the Government 
of Nicaragua, having reference to the interoceanic routes above referred 
to, or either of them, the rights and privileges granted by this treaty 
to the Government and citizens of the United States shall be fully pro¬ 
tected and reserved. And if any such grants or contracts now exist, 
of a valid character, it is further understood that the guarantee and 
protection of the United States, stipulated in Article XV of this treaty, 
shall be held inoperative and void until the holders of such grants and 
contracts shall recognize the concessions made in this treaty to the 
Government and citizens of the United States with respect to such 
interoceanic routes, or either of them, and shall agree to observe and 
be governed by these concessions as fully as if they had been embraced 
in their original grants or contracts; after which recognition and agree¬ 
ment said guarantee and protection shall be in full force: provided, 
that nothing herein contained shall be construed either to affirm or to 
deny the validity of the said contracts. 

Article XIX. 

After ten years from the completion of a railroad, or any other route 
of communication through the territory of Nicaragua from the Atlantic 
to the Pacific ocean, no company which may have constructed or be in 
possession of the same shall ever divide, directly or indirectly, by the 
issue of new stock, the payment of dividends or otherwise, more than 
fifteen per cent per annum, or at that rate, to its stockholders from tolls 
collected thereupon; but whenever the tolls shall be found to yield a 
larger profit than this, they shall be reduced to the standard of fifteen 
per cent per annum. 

Article XX. 

The two high contracting parties, desiring to make this treaty as dur¬ 
able as possible, agree that this treaty shall remain in full force for the 
term of fifteen years from the day of the exchange of the ratifications; 
and either party shall have the right to notify the other of its inten¬ 
tion to terminate, alter, or reform this treaty, at least twelve months 
before the expiration of the fifteen years. If no such notice be given, 


NICARAGUA CANAL. 


19 


then this treaty shall continue binding beyond the said time, and until 
twelve months shall have elapsed from the day on which one of the 
parties shall notify the other of its intention to alter, reform, or abro¬ 
gate this treaty. 

Article XXI. 

The present treaty shall be ratified, and the ratifications exchanged 
at the city of Managua, within one year, or sooner if possible. 

In faith whereof the respective plenipotentiaries have signed the 
same and affixed thereto their respective seals. 

Done at the city of Managua this twenty-first day of June, in the 
year of our Lord one thousand eight hundred and sixty-seven. 

A. B. Dickinson, [l. s. 

Tomas Ayon. [l. s. 

And whereas the said treaty has been duly ratified on both parts, 
and the respective ratifications of the same were exchanged at the city 
of Granada on the twentieth day of June last: 

Now, therefore, be it known that I, Andrew Johnson, President of 
the United States of America, have caused the said treaty to be made 
public, to the end that the same, and every clause and article thereof, 
may be observed and fulfilled with good faith by the United States 
and the citizens thereof. 

In witness whereof I have hereunto set my hand and caused the seal 
of the United States to be affixed. 

Done at the city of Washington this thirteenth day of August, in the 
year of our Lord one thousand eight hundred and sixty eight, and of 
the independence of the United States of America the ninety-third. 

[seal.] Andrew Johnson. 

By the President: 

W. Hunter, 

Acting Secretary of State . 


CONCESSION AND DECREES OF THE REPUBLIC OF NICARAGUA 
TO THE NICARAGUA CANAL ASSOCIATION OF NEW YORK. 

The President of the Republic to the inhabitants thereof: 

Know ye that Congress has ordered as follows: 

The senate and chamber of deputies of the Republic of Nicaragua do 
hereby decree— 

Only article. —The contract for a maritime interoceanic canal 
entered into the 23d of March, ult., between Dr. Adan Cardenas, com¬ 
missioned especially by the supreme government, and Mr. A. G. Men- 
ocal, member and representative of the Nicaragua Canal Association 
organized in New York, is hereby ratified. This contract shall be a 
law of the Republic if Mr. Menocal accepts it as soon as he be notified, 
with the following modifications and upon the following terms: 

The undersigned, Adan Cardenas, commissioner of the Government 
of the Republic, party of the first part, and Aniceto G. Menocal, repre¬ 
sentative of the Nicaragua Canal Association, party of the second part, 
both having sufficient powers, have entered into the following contract 

S. Doc. 5>G-3 






20 


NICARAGUA CANAL. 


for the excavation of an interoceanic canal through the territory of 
Nicaragua: 

Article I. 

The Republic of Nicaragua grants the aforesaid Nicaragua Canal 
Association, and Mr. A. G. Menocal, representative of the said associa¬ 
tion, accepts on its behalf, for the purposes set forth in article 7, the 
exclusive privilege to excavate and operate a maritime canal across its 
territory, between the Atlantic and Pacific oceans. 

Article II. 

The canai snail be of sufficient dimensions for the free and commodi¬ 
ous passage of vessels of the same size as the large steamers used for 
ocean navigation in Europe and America, provided that no locks used 
in said work shall be less than five hundred and fifty (550) feet in length 
and thirty feet in depth. 

Article III. 

The state declares this work to be one of public utility. 

Article IY. 

The duration of the present privilege shall be for ninety-nine (99) 
years, to be counted from the day the canal shall be opened to universal 
traffic. During the aforesaid period the company shall have the right 
to construct and operate a railway along the whole extent of the canal, 
or those parts of the same that may be considered convenient for the 
better service and operation of the said work. 

Article Y. 

The State binds itself not to make any subsequent concession for the 
opening of a canal between the two oceans during the term of the pres¬ 
ent concession, and also to abstain from granting a concession for a 
railroad, such as might compete with the canal for the transportation 
of merchandise, during the same period; but nothing in this article 
shall prevent the Government of Nicaragua from constructing or per¬ 
mitting the construction of such railways as it may deem advisable for 
commerce and internal traffic. Said Government also to have the right 
to construct or permit the construction of an interoceanic railway if in 
course of time it be demonstrated that the canal is not sufficient to 
satisfy the demands of the traffic of all nations. 

The grantee company shall have the right to establish such telegraph 
lines as it may deem necessary for the construction, management, and 
operation of the canal. The Government shall have the right to occupy 
these lines for the public service without any remuneration to the 
company. 

Article YI. 

The Government of the Republic declares, during the term of this 
concession, the ports of each extremity of the canal, and the canal 
itself, from sea to sea to be neutral, and that consequently the transit 
through the canal in case of war between two powers or between one 
or more and Nicaragua shall not be interrupted for such cause; and 


NICARAGUA CANAL. 


21 


that merchant vessels and individuals of all nations of the world may 
freely enter the ports and pass through the canal without molestation 
or detention. 

In general, all vessels may pass through the canal freely, without dis¬ 
tinction, exclusion, or preference of persons or nationality, provided 
they pay the dues and observe the regulations established by the grantee 
company for the use of the said canal and its dependencies. The transit 
of foreign troops and vessels of war will be subjected to the prescrip¬ 
tions relating to the same established by treaties between Nicaragua 
and other powers or by international law. But entrance to the canal 
will be rigorously prohibited to vessels of war of such powers as may 
be at war with Nicaragua or with any other of the Central American 
Republics. 

Nicaragua will endeavor to obtain from the powers that are to guar¬ 
antee the neutrality that in the treaties that shall be made for that 
purpose they shall agree also to guarantee a zone of land parallel to 
the canal and also a maritime zone in both oceans, the dimensions of 
which will be determined in such treaties. 

Article VII. 

This present agreement, with all its charges and advantages, shall 
be the object of a company of execution in agreement with Articles I, 
X, and those following thereafter. 

Said company shall be the grantee, and whenever said name is used 
in this present contract, reference is made to it. 

Article VIII. 

The present concession is transferable only to such company of exe¬ 
cution as shall be organized by the Nicaragua Canal Association, and 
in no case to governments or to foreign public powers. Nor shall the 
company cede to any foreign government any part of the lands granted 
to it by this contract; but it may make transfers to private parties 
under the same restriction. 

The Republic of Nicaragua cannot transfer its rights or shares by 
selling them to any government. 

Article IX. 

The people of all nations shall be invited to contribute the necessary 
capital to the enterprise, and it shall be sufficient for the fulfillment of 
this requirement to publish an advertisement for thirty (30) consecutive 
days in one of the principal daily papers of each of the cities New 
York, London, and Paris. 

The capital stock of the final company shall be composed of shares, 
bonds, or obligations of any other kind, in such proportion as it may 
deem convenient. The issue and transfer of these obligations shall be 
exempt from stamp dues and from any other imposts or taxes estab¬ 
lished or that may be hereafter established in the Republic. 

Of the capital with which the company shall organize, and which it 
proposes to distribute among the different countries interested in the 
enterprise, there shall be reserved at least five (5) per cent for the Cen¬ 
tral American Government and citizens that may desire to subscribe. 

As soon as the company is ready to open subscription books it shall 
advise the Government of Nicaragua, which will invite the other gov- 


22 


NICARAGUA CANAL. 


ernments and through them private parties to subscribe. All such 
shares not taken within six months following the date on which the 
Government shall have been advised of that circumstance shall remain 
subject to the free disposition of the company. 

Article X. 

The company shall be organized in the manner and under the condi¬ 
tions generally adopted for such companies. Its principal office shall 
be in New York, or where it may be deemed most convenient, and it 
may have branch offices in the different countries of Europe and Amer¬ 
ica, where it may consider it expedient. 

Its name shall be the u Maritime Canal Company of Nicaragua,” and 
its board of directors shall be composed of persons, one-half at least, 
of them shall be chosen from the promoters who may yet preserve their 
quality as such. 

Article XI. 

The Government of Nicaragua in its character of shareholder in the 
company of execution, as hereinafter provided, shall have the perpetual 
right of naming one director, who shall be an integral part of the 
board of directors of the company, with all the rights, privileges, and 
advantages conferred upon them by the statutes of the company and 
the laws of the country under which it shall organize. 

The Government shall also have the right in its aforesaid capacity 
of shareholder to take part in such elections as the company may hold. 

Article XII. 

The company is bound to keep a representative in Nicaragua vested 
with all powers necessary for the proper conduct of the service and for 
the transaction of its business with the Government. 

Article XIII. 

The canal will follow the valley of the river San Juan to Lake Nica¬ 
ragua, through which will be designated the most convenient route for 
communication with the Pacific Ocean. In any event the company 
shall have the most ample freedom to select the route which it consid¬ 
ers most convenient between the two oceans for the excavation of the 
canal and its dependencies and its ports, particularly those serving for 
entrance and exit on both oceans. The company shall have the same 
liberty to adopt the route which may be deemed most advantageous 
and economical for the construction of the canal, after the final survey 
by a commission of competent engineers. 

However, should the company, after the survey of the river San Juan, 
find it necessary to abandon, in any place, the bed of the river, and cut 
a lateral canal, the Government of Nicaragua reserves the right of 
requiring from the company the duty of establishing a communication 
between the part of the San Juan not used for canal purposes and the 
dividing level of the canal, by means of a lock, or a series of locks, suit¬ 
able for the navigation of ships of six feet draft. As soon as the final 
plans are adopted and laid before the Government, it shall notify the 
company within one month after their receipt whether or not they meet 
with its approval, in order that the company may proceed in accord¬ 
ance therewith, it is understood that this duty does not in any manner 




NICARAGUA CANAL. 


23 


compel the company to place or maintain in navigable condition for 
small craft the lower part of the river which these locks may be intended 
to place in communication with the canal. 

Article XIY. 

Within three years, to be counted from the commencement of the 
work upon the Interoceanic Canal, the company shall, at its own 
expense, construct a navigable canal between Lake Managua and the 
navigable part of the Tipitapa River, near Pasquier,of sufficient dimen¬ 
sions to admit of the free passage of vessels drawing six feet and of 150 
feet in length. When completed this canal shall be taken possession 
by the Government of Nicaragua, and will be, after that date, the prop¬ 
erty of the Republic, which, by virtue of its ownership, shall be bound 
to bear all expenses required in the future for the service, maintenance, 
repair, and operation of the canal. But the company shall have the 
right to make use of it for all purposes useful for the maritime canal 
enterprise, and to pass through it freely with its vessels and those 
belonging to contractors employed in the service of the Interoceanic 
Canal during the term of this concession, without being subject to any 
charge whatever, or to pay tolls or contributions of any kind to the 
Government of Nicaragua or to any person or company that may, 
through any cause, be in charge of the administration and operation of 
the work and its dependencies. 

The Government of Nicaragua will place at the disposal of the com¬ 
pany, free of all expenses and charges, all the lands that may be 
required, as well as the materials found thereon, or on those belonging 
to the Government and that may be utilized by the company in the 
execution of this work. 

Article XY. 

All expenditures for surveys, construction, maintenance, and opera¬ 
tion of the Interoceanic Maritime Canal shall be borne by the concession¬ 
ary company, without any subvention in money nor guaranty of interest 
on the part of the Republic, nor other concessions than those specified 
in the present agreement. 

Article XYI. 

The company shall construct at its expense and maintain in good 
condition two large ports, one in the Atlantic and one in the Pacific, 
to serve as termini of the canal, each of them to have a lighthouse of 
the first order. It shall also construct at the two points on the borders 
of the lake, where the canal disembogues, two ports of lesser size, with 
the respective lighthouses. 

The company is also obliged to maintain and improve said ports by 
means of dredges, dikes, piers, embankments, or any other works it 
may deem advisable, having always in view the good service of the 
traffic through the canal. 

It may, for this purpose, select on the coasts of the two oceans,within 
the territory of Nicaragua, the localities which the surveys made indi¬ 
cate as preferable. 

Article XYII. 

All the space necessary, whether on the mainland, in the lake and 
its islands, at the ports, roadsteads, or rivers of the two oceans, for the 
establishment of the canal, its paths, and embankments, for deposit- 


24 


NICARAGUA CANAL. 


ing the materials from the excavations and cuttings for the necessary 
spaces to be occupied by water after raising the dams which are to be 
constructed in the bed of the river, for all necessary deviations of 
streams, as well as for reservoirs, dikes, spaces about the locks, stations, 
lights and beacons, storehouses, buildings and workshops, deposits for 
materials, and also all those spaces necessary for the routes, service 
railways, and canals of the same nature for the transportation of the 
materials to the line of the work and for feeders for the canal; in short, 
all lands and places necessary to the construction and operation of the 
canal, as laid down in the drawings and plans made by the engineers 
of the company, shall be placed at the disposal of the company by the 
State, under the conditions set forth in the following articles. 

Article XVIII. 

Said lands belonging to the State will be given to the company with¬ 
out any compensation whatever; and, with regard to those belonging 
to private parties, the State charges itself with their expropriation if 
the company so requests. The compensation which may be required 
in this case shall be paid by the company. 

Article XIX. 

In all relating to the appropriation that may be made in conformity 
with the preceding article, the company shall enjoy all the immunities 
and privileges which the laws of the country accords to the State; so 
that in no case shall the company be obliged to pay more than the State 
would under similar circumstances. 

Article XX. 

The Government obliges itself to place the company, within six 
months after its request, in possession of up to one thousand (1,000) 
manzanas of land between the lake and the Pacific, at such places as 
the company shall designate, but they are to serve exclusively for cut¬ 
ting the caual, its havens, ports, and other accessory works. The Gov¬ 
ernment shall on its own account cause the necessary expropriation to be 
made, and the company shall pay to it for all indemnity the sum of fifty 
thousand dollars ($50,000.00) American gold. This payment to be made 
by the company in Managua within four months after the date of its 
request. 

Article XXI. 

The company shall have the right to take, free of charge, from the 
public lands, for the purpose of construction, operation, and mainte¬ 
nance of the canal, whatever materials may be found on them, especially 
timber for construction and for fuel, the lime, stone, clay for bricks, 
and earth for fillings as may be necessary. As regards materials found 
on private lands, the company shall pay for what it may need thereof, 
enjoying in this respect the same rights and privileges which the State 
enjoys according to law. 

Article XXII. 

Should the company require to occupy, temporarily and during the 
construction of the canal, lands in the territory of Nicaragua which are 
not included in those designated in articles 17, 18, and 21, it shall not 


NICARAGUA CANAL. 


25 


be obliged to pay any indemnity for them if they are public lands; and 
the State shall not have the right to sell or dispose of them in any other 
manner after the company has determined to occupy them, unless under 
the reservation of this right, tvhose limit shall be the completion of the 
works on the interoceanic canal. Should the lands belong to private 
parties the company shall enjoy, in regard to their temporary occupa¬ 
tion, all the rights and privileges which the law accords to the State, 
with the special privilege of occupying them immediately after the dec¬ 
laration of necessity and utility, and after paying the compensation, 
which shall not exceed that which the State should be compelled to pay 
in a similar case. 

Article XXIII. 

The Republic of Nicaragua, desiring to assist the company effica¬ 
ciously in the construction of the interoceanic canal, a work in which 
it takes the deepest interest, cedes in fee simple to the said company 
the public lands hereinafter mentioned in alternate lots with other sim¬ 
ilar ones which it reserves to itself, and of the dimensions and in the 
places as specified hereinafter: 

1st. On the left bank of the river San Juan, from the Atlantic to 
Castillo Viejo, lots of three miles frontage on the canal and six miles 
in depth from the banks of the river. YVhere the canal diverges more 
than six miles from the banks of the river the lots are to be measured 
on both sides of it, and shall be three miles wide and six miles deep. 
And where this distance is less than six miles the lots shall be three 
miles front and three miles deep, and they shall be measured from the 
bank of the canal to the river, taking what may be lacking from the 
opposite bank of the canal. 

2d. Three miles distance from Castillo up stream, on the right bank 
and up to the lake, lots of two miles in depth and two of frontage on 
the canal. From the lake along its south shore to the river Sapoa and 
thence to the river Lajas, lots of one mile frontage and one mile depth. 
On the left bank of the river from a point in front of Castillo and up 
to the lake, lots of three miles of frontage on the canal and four miles 
in depth. 

3d. On the north shore of the lake, as far as the river Tule, lots of 
two miles frontage on the lake and two miles deep. 

4tli. In the places which the company selects in accordance with the 
government of the existing public lands, forty (40) lots, each four miles 
frontage by five miles deep, reserving always the acquired rights. 

It is understood that the Government reserves around each of the 
forts Castillo and San Carlos the lands included in a circle of one and 
one-half (1J) miles radius, whose center shall be the respective 
fortresses. 

As a general rule, at the extremities of the interoceanic canal and at 
its points of contact with the lake, the opposite lots will be allotted one 
to the Government and one to the company, but if this be not possible 
the first will belong to the Government. 

From the Atlantic to the lake that part of the river bed occupied by 
the canal shall be considered as part of the latter for all purposes of 
this article. 

The measurement and setting out of all lands ceded by this contract 
shall be made at the expense of the grantees under the supervision of 
the Government. 

The State shall vest in the company the possession of said lands so 
soon as the said company shall begin operations on the canal. Opera- 


26 


NICARAGUA CANAL. 


tions shall be regarded as begun when the provisions set forth in arti¬ 
cle 47 shall have been complied with. The final title deeds shall not be 
granted except as the work of the canal progresses and in due 
proportion. 

Article XXIV. 

In the unforeseen case that a new survey should show the necessity 
of adopting another line for the construction of the canal which varies 
wholly or in part from the line set forth in article 13, the company shall 
have the right to the lands and other elements necessary for the con¬ 
struction of the canal, according to articles 16, 17, 18, 19, 21, and 22. 

The company shall, in that event, also have the right to the lands 
mentioned in the preceding article, in the same proportions, conditions, 
and dimensions therein established, with the single proviso that if it 
alter the line the localities whence these lands shall be taken shall be 
altered accordingly. 

Article XXY. 

The State reserves the right to occupy, in the several lots of land 
granted the company, such places as it may need for such roads and 
public buildings as it may deem convenient. In the same manner it 
may use timber and other building materials found on such lands 
whenever they may be necessary for any work upon which it may 
determine. However, these lands with all their products, vegetable 
and mineral, shall be subject to the laws of the country so soon as they 
become the property of individual citizens by transfer from the com¬ 
pany, and then, should the State need them for the ends set forth in 
this article, or for any others, it shall make compensation to their 
owners according to law, without any right on the part of the expro¬ 
priated owners to reclaim against the company. 

Should the company have improved the lands so taken for purposes 
of use, ornament, or pleasure, the State shall be bound to reimburse it 
for such damages as it may have sutfered, according to the assessment 
of experts. 

Article XXVI. 

Mines of coal, stone, gold, silver, iron, or other metals situated in the 
lands granted to the company shall belong to it by right, without need 
of previous u denunciation,” it having the right to work them when 
considered expedient, subject to the laws of the country. 

Article XXVII. 

The company shall also have the right to utilize for its account, for 
sale or exportation, the lumber in the forests situated in the lands 
ceded to it by the State from the time they enter into possession of them 
in accordance with this contract; that is, from the time of commence¬ 
ment of the works, always saving the acquired rights. 

Article XXVIII. 

-'rom the day on which the present concession is ratified by Congress 
the public lands included in those necessary for the construction of the 
canal can not be sold, nor can any of those ceded to the company on 
the banks of the canal by article 23. Xor can they be leased to the 
prejudice of the company. 



NICARAGUA CANAL. 


27 


Article XXIX. 

Tlie company shall have the right, throughout the extent of the caual 
as well as at its mouth on both oceans, and in the lake and throughout 
the extent of the lands ceded by virtue of articles 16, 17, 22, and 23, to 
enter upon the work of locating, leveling, excavating, dredging, and in 
general any other work of whatsoever nature that may be judged useful 
for the establishment and feeding of the canal, or for its operation, 
preservation, and maintenance. The company is specially authorized 
to execute along the canal line and on the banks of the river San Juan 
and its affluents, within the territory of Nicaragua, and also on the 
tributaries of Lake Nicaragua, the lakes or water courses which can 
be utilized in their flow to the Pacific, the system of dikes, rectifica¬ 
tions, dredgings, embankments, dams, cuts, location of buoys, and in 
general all the works that in the opinions of the engineers of the com¬ 
pany are deemed indispensable for the construction, feeding, naviga¬ 
tion, and operation of the canal. The company may also do all works 
of like character deemed necessary at the entrances of the canal into 
Lake Nicaragua, as well as in the lake itself, in accordance with the 
route that may be determined upon in order to secure in it easy navi¬ 
gation, and as may be found necessary in the other lakes or lagoons 
that are to be traversed. 

The embankments, fillings, and dikes formed in the mouths of the 
canal in the lake and in the ports on the oceans, by deposits of mate¬ 
rials resulting from the excavations of the canal, shall belong in fee 
simple to the comi>any; the Government having the right to use them 
if necessary, after compensation made. But it may never obstruct 
said ports nor widen the beaches in front of them, unless there is abso¬ 
lute necessity to do so, and in this case the embankments and fillings 
that it may be necessary to construct in front of the ports shall belong 
to the Republic. 

In general the company shall have the right to use all the lakes and 
rivers of Nicaragua, the waters of which maybe necessary, in the judg¬ 
ment of the engineers of the company, for the construction and supply 
of the canal and for maintaining its operations. It being understood 
that the damages caused to private parties by the deviation of the 
water courses shall be compensated for by the company according to a 
just assessment by experts in agreement with the laws of the Republic. 

Article XXX. 

The company shall not import merchandise into the territory of the 
Republic for the purpose of trafficking without paying the import duties 
established by law. But it may import free of custom duties, and of 
any tax whatsoever, the articles needed for the works of the enterprise, 
such as surveys, examination of localities, construction, use, operation, 
maintenance, repairs, and improvements of the canal; for the telegraphic 
service, and for that of the railways; for running the workshops the 
company may keep in operation; and such articles may consist of tools, 
machinery, apparatus, coal, limestone of all classes, lime, iron, and other 
metals, raw or manufactured, mining powder, dynamite, or any other 
analogous substance. These articles may be transported between what¬ 
ever points they may be required during the works ot* opening of the 
canal, and be discharged and stored free of all local taxes. 

The company may import free of duties and taxes, during the work 
on the canal, provisions and medicines absolutely necessary for its own 


28 


NICARAGUA CANAL. 


consumption. Goods, tlie commerce of which is not free, are excepted 
from the privileges contained in this article, which goods, excepting 
powder, dynamite, and other explosives, remain subject to the requisites 
and duties prescribed by the laws. 

Article XXXI. 

The vessels employed by the company as tugboats or for the service 
of the canal shall be free from all duties and also the materials for their 
repair and the fuel they use. The vessels and appurtenances from 
whatever place they may be coming for the use of the company shall 
also be exempt from all duties. 

Article XXXII. 

The Government will establish such regulations as it may judge 
necessary to prevent smuggling and to maintain public order in the 
region of the canal. 

The company is bound to lend its assistance for the enforcement of 
such regulations. But in the free zone along the margin of the canal, 
as hereinafter provided, measures for the prevention of smuggling shall 
be limited to vigilance on the part of the employ^ or employes whom it 
may concern without any further measures being taken against pas¬ 
sengers, vessels, or their cargoes, excepting when an attempt at smug¬ 
gling is discovered; it being the intention of the State that there should 
be the most ample liberty of transit by the canal for persons and prop¬ 
erty, with the sole limitations established by this contract. Conse¬ 
quently the company shall have the right to discharge and reload ships 
in transit at such points as may be necessary in order to make repairs, 
lighten the vessel, shift cargo, or on account of any accident that 
renders it absolutely necessary, without being subject to search, exac¬ 
tions, or contributions of any kind, provided that in each case, and 
before beginning operations, the nearest custom-house authority shall 
be notified. 

Article XXXIII. 

The Government shall lend its protection, in conformity with the laws 
of the country, to the engineers, contractors, employes, and laborers 
engaged in the preliminary surveys or in the works of construction and 
operation of the canal. 

Article XXXIV". 

The company shall be exempt from all forced loans and military exac¬ 
tions in time of peace and of war. The foreign agents and employes 
shall likewise be exempt from direct contributions, forced loans, and 
military exactions during the time they are in the service of the canal, 
but they shall pay the taxes established by the laws if they acquire 
real property. 

Article XXXV. 

The company may freely introduce immigrants into the lands ceded 
to it, and the employes and workmen needed in its works and work¬ 
shops. Asiatics, however, are excepted. Both the immigrants and the 
employes and workmen will be subject to the laws of the Republic and 
the regulations of the company. The Government assures them aid 





ICARAGUA CANAL. 


29 


and protection and tlie enjoyment of their rights and guarantees in 
conformity with the constitution and the national laws during the time 
they remain on Nicaraguan territory. 

Article XXXVI, 

The Government of Nicaragua assures to the company and its agents 
under the laws of the country, as it does to the other inhabitants, the 
full enjoyment of the guarantees and rights which the constitution and 
the same laws grant to them. And reciprocally the company and its 
agents bind themselves strictly to respect the laws and regulations 
that are in force in Nicaragua, and especially to comply with the exec¬ 
utory judgments of the tribunals without considering themselves 
vested with other rights than those which the laws concede in favor of 
the Nicaraguans. 

Article XXXYII. 

The Government shall establish all along the line of the canal included 
between the two terminal ports such police stations and revenue offices 
as in its judgment are necessary to preserve order in the region of the 
canal and for the observance of the fiscal laws of the Republic. All 
expenses incident to this service, including those of buildings, endow¬ 
ments, salaries and allowances of employes, and transportation of the 
forces, shall be paid to the Government by the company on such terms 
and conditions as may be established, taking into consideration the 
requirements and necessities of such service. The company, however, 
shall have the power to establish guards and watchmen for the service 
of the canal and the enforcement of its regulations. 

Article XXXYIII. 

Contracts for labor on the canal shall enjoy the privileges which the 
laws of the country accord to agricultural contracts, provided they be 
clothed with the formalities that the laws require in such contracts. 
And the contracts in regard to canal labor that the company execute in 
foreign countries shall be valid and lawful in Nicaragua during the term 
stipulated in them, provided they do not violate the laws of the Repub¬ 
lic; provided also the documents containing them be presented to the 
proper authorities, with due authentication, that they may be registered. 

Article XXXIX. 

The company shall be exempt during the period of this concession, 
in peace and in war, from all manner of taxes upon the real property it 
may acquire by virtue of this contract, and from every kind of direct 
contributions, local taxes, or any other tax relating to the property and 
use of the canal, its buildings, and constructions appertaining thereto, 
in its entire length, including those that are situated in the ports and 
maritime establishments on the two oceans, as also the lands conceded 
to the company for the whole term of the privilege. This franchise is 
not assignable to those who buy the real estate which the company may 
dispose of by virtue of this concession. 

Article XL. 

The Republic of Nicaragua shall not establish any tonnage, anchor¬ 
age, pilot, light house dues or charges of any kind whatsoever upon 
vessels of whatever class, or upon the merchandise, baggage, and pas- 


30 


NICARAGUA CANAL. 


sengers which may pass through the canal from one ocean to the other, 
all such dues being reserved for the benefit of the company, as herein¬ 
after set forth in article 43. 

But all such merchandise as shall be loaded or discharged at any 
point of the canal intended for sale shall pay the import and export 
duties fixed by the revenue laws of the state. 

Article XLI. 

With the view oi securing the most ample freedom in the transit of 
persons and property, and in order to remove as far as possible occa¬ 
sions for disagreeable questions, there shall be on each side of the canal 
a free zone, the extent of which shall be one hundred yards measured 
from the water’s edge in the canal, it being understood that the borders 
of the lake shall not be considered as margin of the canal for the pur¬ 
poses of this stipulation. 

All traffic declared illegal by the laws of the Eepublic shall be pro¬ 
hibited within the said zone, and the revenue authorities charged with 
watching and preventing smuggling shall act in conformity with the 
stipulations in article 32. 

It is expressly agreed that every vessel that passes through the canal 
shall carry on board an officer named by the Government when the 
authorities think it necessary, and this employe shall act in conformity 
with the law in case he discovers its infringement. 

The two ports to be constructed for the entrance and exit of the canal 
on the two oceans shall be declared free ports, and they shall be recog¬ 
nized as such from the beginning of the work to the termination of this 
concession. 

The Government in agreement with the company shall establish, by 
special decree, the limits of the freedom of these ports, which limits 
shall not extend beyond the waters of the port, which are those included 
between the mouth of the canal and the entrance to the said ports. 

Article XLII. 

For the proper administration of the canal and its appurtenances, and 
in order to facilitate its construction and operation, the company shall 
establish the necessary regulations, which shall be binding on all per¬ 
sons found in its waters or its appurtenances, the sole reservation being 
that the rights and sovereignty of the State be respected. 

It being understood that the company in the exercise of the powers 
conferred by this article may not make other regulations than those 
necessary for the administration and particular management of the 
canal, and that before executing and enforcing these regulations they 
shall be submitted to the Government for approval. The state will 
lend the aid of its authority for the enforcement of these regulations. 

Article XLIII. 

By way ot compensation for the expenses of surveys, construction, 
maintenance, and operation of the canal, which under the present con¬ 
cession shall be at the cost of the company during the period of said 
privilege, it shall have the right to establish and collect for the passage 
of all kinds of vessels, travelers, and merchandise through the canal, 
and in the waters and ports pertaining to it, taxes on navigation, ton¬ 
nage, and pilotage, towage, storage, lay days, anchorage, light, road- 


NICARAGUA CANAL. 


31 


stead dues, wharfage, hospital dues, and any other similar charges in 
conformity with the tariff to be established by it in accordance with 
Article LII of this contract. 

These tariffs may be modified by the company at any time on condi¬ 
tion that all modifications that may be introduced shall previously be 
communicated to the Government, which, in case of finding them within 
the limits established by the said Article LII, shall cause them to be 
complied with as if they were regulations enacted by itself. 

The payment of all the tariff dues shall be exacted without any 
exception or preference, and under identical conditions, from all vessels, 
whatever be the place they come from or their nationality, with the 
exception stipulated in the following article. 

Article XLIY 

As compensation for the privileges and concessions that Nicaragua 
grants by this contract, it is hereby stipulated that the Republic shall 
enjoy the special privilege that Nicaraguan vessels sailing under the 
Nicaraguan flag may navigate the canal at a reduction of fifty (50 per 
cent) per centum from the general tariff while engaged in the coasting 
trade or in the reciprocal trade with the other republics of Central 
America. It is declared that the vessels referred to in the preceding 
paragraph must be exclusively of the register of the Republic, and they 
must not be owned, either in whole or in part, by citizens of other 
countries. 

A reduction of fifty (50 per cent) per cent from the general tariff is 
also granted to vessels that begin their voyage for a foreign country in 
any of the ports belonging to the Republic, with a cargo wholly com¬ 
posed of products of the country. All the privileges to which this 
article refers shall be extended to the other Republics of Central 
America whenever Nicaragua shall find itself free from international 
obligations which may prevent it, or whenever one or more of the said 
Republics shall form a single nation with Nicaragua. The company can 
not collect atiy navigation dues whatever upon vessels and craft navi¬ 
gating the lake of Nicaragua and its prolongations without passing out 
of the locks. The Nicaraguan vessels of war, and in the case above 
provided those of the Republic of Central America, shall not pay any 
dues on passing through the canal. 

Article XLY. 

In case it may be possible to utilize the waters of the canal and its 
dependencies for the irrigation of plantations, gardens, and streets, or 
for the supply of towns that may be without it, or as motive power for 
private enterprises, the company shall have power to supply it, collect¬ 
ing dues in proportion to the amount furnished, according to the tariff* 
that it may be establish in agreement with the Government. 

uticle XLYI. 

n view of the existence ol an exclusive privilege granted by the 
Republic in favor to Mr. F. Alf. Pellas, by a contract ratified on the 
lfith of March, 1877, for the navigation by steam on the lake and river 
for the purposes of the internal commerce of the Republic, the canal 
company shall have the right of expropriation against Mr. Pellas, as 
regards his rights and properties, on just assessments by experts, after 


32 


NICARAGUA CANAL. 


making a corresponding compensation according to the laws of the 
Republic. 

It is also stipulated that the company binds itself to pay to the Gov¬ 
ernment of the Republic all it may from now on expend in any way for 
the improvement of the navigation of the river and the port of San 
Juan del Norte. This payment shall.be made within six months of the 
date of the beginning of the works of the canal, and according to the 
original accounts of the corresponding office. 

Article XLVII. 

The company shall undertake at its expense the final surveys of the 
ground and the location of the line of the canal by a commission of 
competent engineers, two of whom shall be appointed by the Govern¬ 
ment of the Republic, which shall protect as far as it may the said 
commission. 

There is granted to the concessionary company a term, not exceeding 
one year, in which to commence the final surveys for the canal, and one 
year and one-half additional for completing them; to organize the exe¬ 
cuting company, and commence the work of construction. Said terms 
shall begin to be counted from the date of the ratification of the present 
contract by the Nicaraguan Congress, published in the official paper, 
which shall be construed as notification. Furthermore, said terms are 
not to be extended, and it is understood that operations are not con¬ 
sidered to have been begun if during the first year of the work two 
million dollars ($2,000,000) are not expended on it. 

Article XLYIII. 

A term of ten years is also granted to the company for the construc¬ 
tion, completion, and opening of the canal for maritime navigation. 
However, should events of main force arise, duly justified and sufficient 
to impede the regular progress of the works during the period of the 
said ten years, an extension shall be granted equal in duration to the 
time that may have been lost by such delays. 

If, at the expiration of the ten years aforesaid, the works should not 
be completed so as to have the maritime communication between the 
two oceans opened, in consideration of the great capital the company 
may have invested in the enterprise, and of the good will and ability 
it may have shown, and the difficulties encountered, the Republic binds 
itself to concede a new extension. 

Article XLIX. 

As a guaranty of the fulfillment of the obligations which the com¬ 
pany incurs in accordance with Article 47, it shall deposit to the order 
of the Government of Nicaragua in a bank or in a mercantile house in 
the city of New York, which the Government may designate and within 
sixty (00) days from the date of the ratification of this contract, the 
sum of one hundred thousand ($100,000) dollars, American gold, which 
the company shall forfeit to the Republic if it do not fulfill the said 
obligations; and which sum otherwise shall be considered an advance 
to the Government on account of the necessary expenses of payment of 
the police of the canal according to the stipulations set forth in Article 
37. This deposit, as soon as made, shall be at the disposal of the 
Government. 


NICARAGUA CANAL. 


33 


Article L. 

In consideration of tbe valuable privileges, franchises, and conces¬ 
sions granted to the company by this contract, the Republic shall 
receive in shares, bonds, certificates or other securities whicli the com¬ 
pany may issue to raise the corporate capital, six per centum of the 
total amount of the issue. 

Such shares, bonds, certificates, or other securities shall be free of all 
payment on the part of the Republic, being considered as paid in full. 
The six per centum shall in no event be less than four million dollars 
($4,000,000)—that is to say, forty thousand shares or obligations of 
whatsoever kind of one hundred ($100) dollars each. 

Of said shares, bonds, certificates, or securities of whatsoever class, 
two-thirds shall not be transferable; but all shall participate in the 
benefits, interests, partitions, dividends, sinking funds, rights, priv¬ 
ileges, and in all the advantages given to paid up shares without any 
distinction. The Government in its capacity of shareholder shall 
besides have the right to appoint one director, who shall represent its 
interest in the board of directors of the canal company from the time 
of its definite establishment. The shares referred to iu this article 
shall be delivered to the agent the Government may appoint to receive 
them and as soon as the company shall be ready to issue the certificates 
for its capital. 

Article LI. 

In order that the canal association may indemnify itself for the 
expenses it may have had to incur for the verifications, preparations, 
explorations, and surveys hereinbefore mentioned, and for all other 
expenditures that it will have to make until the definite organization 
of the company, it shall have the right from the time of the organiza¬ 
tion of said company to six per cent in shares, bonds, certificates, or 
other securities which the company may issue for the purpose of rais¬ 
ing the corporate capital and which are to be issued in excess of the 
capital to be subscribed. 

These bonds, shares, or securities shall be identically like the sub¬ 
scription shares, and issued from the same register or stock book. As 
a consequence they shall participate in all benefits, interests, partitions, 
dividends, sinking fund, rights, privileges, and of all the advantages 
given to the paid up shares, bonds, or securities without any distinc¬ 
tion whatever. 

Article LII. 

From the receipts of the enterprise the company shall take in the 
first place the necessary amount to cover all the expenses for mainte¬ 
nance, operation, and administration; all the sums necessary to secure 
the interest, which shall not exceed six per centum, andthe amortization 
of the obligations and of the shares, and what remains shall form the 
net profits, of which at least eighty per centum (80 per cent.) shall be 
divided among the shareholders, it being agreed, that after the lapse of 
ten years after the completion of the canal the company shall not 
divide among the shareholders in payment of dividends, directly or 
indirectly, by issue of shares or otherwise, more than fifteen per cen¬ 
tum (15 per cent.) annually or in this proportion, from dues collected 
from the aforesaid canal and where it shall appear that these dues 
yield a greater profit they shall be reduced to the fixed limit of fifteen 
per cent per annum. 

S. Doc. 291-3 



34 


NICARAGUA CANAL. 


Article LIII. 

The present concession shall be forfeited: 

1st. Through the failure on the part of the company to comply with 
any of the conditions contained in Articles 8, 40, 47, 48, and 49. 

2d. If the service of the canal, after its completion, be interrupted 
for six mouths, except in cases of main force. 

When the concession shall have been declared forfeited, from which¬ 
ever of these causes, the public lands granted by this convention will 
revert to the Republic, in whatsoever state they may be, and without 
compensation even in the case that buildings may have been erected 
thereon. 

Such lands shall be excepted as may have been alienated to private 
parties by the company, with the formalities prescribed by law, provided 
that such alienations shall not have taken place within the six months 
preceding the date on which the company may have become legally 
liable to the penalty herein established. 

Article LIY. 

✓ 

On the expiration of the ninety-nine years stipulated in this conces¬ 
sion, or in the event of the forfeiture contained in the preceding article, 
the Republic shall enter upon possession in perpetuity, of the canal, of 
works of art, light houses, storehouses, stations, deposits, stores, and all 
the establishments used in the administration of the canal, without 
being obliged to pay any indemnity to the company. 

There shall be excepted from this condition, tjie vessels belonging to 
the company, its stores of coal and other materials, its mechanical work¬ 
shops, its floating capital and reserve fund, as also the lands ceded to it 
by the State, excepting those in which are established the works indi¬ 
cated in the first part of this article, and which will revert to the State 
together with their immediate appurtenances, as necessary for the 
service of the canal, and as an integral part of the same. 

But the company shall have the right, at the expiration of the afore¬ 
said term of ninety-nine years, to the full enjoyment of the free use and 
control of the canal in the capacity of lessee, with all the privileges 
and advantages granted by the said concession, and for another term of 
ninety nine years, on the condition of paying twenty-five per cent of the 
annual net profits of the enterprise to the Government of the Republic, 
besides the dividends due to it for its shares iu the capital stock. 

The company furthermore shall have the right to fix, at its discretion, 
the dues referred to in article 43 of this concession, so that the share¬ 
holders still receive dividends not to exceed ten per centum per annum 
on the whole capital after deducting the payment of twenty-five per 
cent of the net gains to the Government. 

At the expiration of this second term of ninety-nine years the Gov¬ 
ernment shall enter into perpetual possession of the canal and other 
pr operties referred to in the first part of this article, including also in 
this possession all that which is excluded in the said first part with the 
exception of the reserve and amortization funds. The failure to com¬ 
ply with any of the terms of the lease shall terminate it, and the State 
shall enter into possession of the canal and other works belonging to 
it in accordance with the provisions of the preceding paragraph. 

Article LY. 

Any misunderstanding that may arise between the State of Nicara¬ 
gua and the company in regard to the interpretation of the present 



NICARAGUA CANAL. 


35 


stipulations sliall be submitted to a court of arbitrators composed of 
four members, two of which shall be appointed by the State and two 
by the company. 

These arbitrators shall be designated by each of the parties within 
the period of four months from the day on which one of the contract¬ 
ing parties shall have informed the other in writing of the want of 
agreement on the point at issue. Should one of the parties allow the 
aforesaid term to pass, it shall be considered as assenting to the opin¬ 
ion or claim of the other. 

The majority of the votes of the arbitrators shall decide finally and 
without recourse. In case of a tie vote the arbitrators shall select, by 
mutual consent, a fifth person, who shall decide. If unable to agree to 
such nomination, they shall draw by lot the names of the diplomatic 
representatives accredited to Nicaragua, and the first one drawn out 
shall exercise the functions of the fifth arbitrator; he shall either adopt 
the opinion of one or the other of the parties to the controversy, or ren¬ 
der his opinion between these extremes, and his decision shall be final 
and without any appeal whatever; the fifth arbitrator failing, the sec¬ 
ond person drawn shall exercise these functions, and so on successively 
until a decision is reached. 

Prior to the initiation of the works of opening the canal the Govern¬ 
ment shall formulate, with the concurrence of the company, rules to be 
observed by the arbitrators in all matters relating to procedure. 

Questions between the company and individuals residing in Nicara¬ 
gua shall be under the jurisdiction of the ordinary tribunals of Nica¬ 
ragua, in conformity with the legislation of the country. In matters 
pertaining to nonresidents of Nicaragua the rules of international pri¬ 
vate law will be observed. 

In witness of the foregoing stipulations, we have signed two instru¬ 
ments of the same tenor in Managua, on the 23d day of March, one 
thousand eight hundred and eighty-seven. 

Ad. Cardenas. 

A. G. Menocal. 


The Government, finding the foregoing contract in conformity with 
the instructions transmitted, determines to approve it in all its parts 
and to submit it to Congress for its ratification. 

Managua, April twelfth, one thousand eight hundred and eighty- 
seven. 

E. Carazo. 

The acting subsecretary of the interior. 

Canton. 

Done in the hall of sessions of the chamber of deputies, Managua, 
April 20, 1887. 

TomAs Armijo. 

Leopoldo M. Montenegro. 

Luis E. Saenz. 


To the S. E. P. hall of the senate, Mauagua, April 23, 1887. 

Joaquin Zavala. 


S. Morales. 


Eliodoro Eivas. 


Therefore be it executed. Managua, April 24,1887. 


S. Doc. -4 


E. Carazo. 



36 


NICARAGUA CANAL. 


The subsecretary of the interior in charge of the office: 

Alejandro Canton. 


Accepted on the same date. 


Danton. 

A. G. MENOCAL. 


I do hereby certify the preceding signature of the subsecretary ol 
the interior, which reads Alejandro Canton, to be genuine. 

Managua, April 25, 1887. 

Joaquin Elizondo. 


CONCESSIONS AND DECREES OF THE REPUBLIC OF COSTA RICA 
TO THE NICARAGUA CANAL ASSOCIATION OF NEW YORK. 

The Constitutional Congress of the Republic of Costa Rica, in the exer¬ 
cise of the powers granted to it by section 4, article 73, of the consti¬ 
tution, decrees— 

Article First.— The contract entered into on the 21st of July last, 
between the honorable minister of public works, authorized for this 
purpose by the honorable President of the Republic, on behalf of the 
Government of the same, and Mr. Aniceto G. Menocal, on behalf of the 
Nicaragua Canal Assosiation, for excavating and operating an inter- 
oceanic canal crossing, either in whole or in part, through the territory 
of the Republic, or running along the whole or part of its boundary with 
Nicaragua, is hereby approved. 

The aforesaid contract with the modifications agreed to by Congress 
reads literally as follows: 

The undersigned, Pedro Perez Zeledon, secretary of the State bureau 
of public works, especially authorized by the honorable general, Presi¬ 
dent of the Republic, to celebrate ad referendum the present contract, 
party of the first part, and Aniceto G. Menocal, representing the Nica¬ 
ragua Canal Association, with full powers from it, and also authorized 
for this purpose by the executive committee of the said association, 
party of the second part, have revised the contract for the canal made 
in Washington on the 17th of last May, by the party hereto of the first 
part, in his capacity as envoy extraordinary and minister plenipoten¬ 
tiary of the Republic of Costa Rica to the Government of the United 
States of America, and Mr. Hiram Hitchcock, president of the afore¬ 
said association j the said contract, with the modifications now agreed 
to by the undersigned, reads as follows: 

4 

Article I. 

The Republic of Costa Rica grants to the Nicaragua Canal Associa¬ 
tion, its successors and assigns, the exclusive privilege to excavate 
and operate a maritime canal between the Atlantic and the Pacific 
oceans, running either wholly or in part through the territory of the 
said Republic or along the whole or a part of her border line with the 
Republic of Nicaragua. 

To render this contract fully efficient between the contracting parties 
hereto, it will be sufficient if the association aforesaid should use or 
occupy for the works of the said canal, or for any of its ports in one or 
the other oceans, any Costa Rican waters or at least waters in which 
Costa Rica has joint ownership or has rights of use and navigation. 



NICARAGUA CANAL. 


37 


Whenever the word “ association” is used in this present document 
reference is made to the “ Nicaragua Canal Association,” its successors 
and assigns. 

Article II. 

The canal must be of sufficient dimensions for the free and commodi¬ 
ous passage of vessels of the same size as the large steamers used for 
ocean navigation between Europe and America. 

Article III. 

The State declares this work to be one of public utility. 

Article IY. 

The duration of the present privilege shall be for ninety-nine years, 
to be counted from the day on which the canal shall be opened to 
universal traffic. 

During the aforesaid period the association shall have the right to 
construct and operate within the territory of Costa Rica a railroad 
along the whole extent of the said canal, or those parts of the same 
which it may consider convenient for the better service and operation 
of the said work. 

The Republic binds itself not to make any subsequent concession for 
the opening of a canal between the two oceans as long as the present 
privilege lasts. 

The Republic will also abstain during the same period from granting, 
within a zone of twenty-five miles along the canal, concessions for rail¬ 
roads from sea to sea that might compete with the canal in the traffic 
between foreign nations. This restriction shall not prevent the con¬ 
struction of new railroads that may be convenient for Costa Rico to 
build to the canal, or to any point on the northern frontier of the 
Republic, either connecting or not with any other railroads. 

Article V. 

The grantee association shall have the right to establish such tele¬ 
graph lines as may be considered necessary for the construction, man¬ 
agement, and operation of the canal. 

The Government shall have the right to use the telegraph lines of 
the company from any station to any station that may be included 
within the line from sea to sea, without being obliged to pay the com¬ 
pany for such service. 

Article YI. 

The Government of the Republic declares and accepts that the ports 
at each extremity of the canal and the canal itself from sea to sea dur¬ 
ing the time of this concession shall be neutral; and consequently in 
case of war between other nations, or between one or more nations and 
Costa Rica, the transit through the canal shall not be interrupted for 
such cause, and the merchant vessels and individuals of all nations of 
the world may freely enter the aforesaid ports or pass through the 
canal without molestation or detention. 

In general, all vessels shall freely pass through the canal without 
distinction, exclusion, or preference, whether of persons or nation- 


38 


NICARAGUA CANAL. 


alities, provided tliat they pay the dues and comply with the rules 
established by the association for the use of the said canal and its 
dependencies. 

The transit of foreign troops and vessels of war shall be regulated 
by such provisions in regard thereto as are now or may be hereafter 
established in the treaties between Costa Rica and other powers, or by 
international law. But the entrance of the canal shall be strictly ior- 
bidden to vessels of war of any nation which may be at war with Costa 
Rica or with any other of the Republics of Central America. 

Costa Rica shall endeavor to obtain from the powers that are to guar¬ 
antee the neutrality that in the treaties to be made for that purpose 
they shall also bind themselves to guarantee the same conditions to a 
zone of land parallel to the canal and also to a maritime zone in both 
oceans, the dimensions of which shall be fixed by such treaties. 

Article VII. 

The present concession shall be transferable only to such company or 
companies as maybe organized for the purpose of constructing or oper¬ 
ating the canal, and in no case to foreign governments or to foreign 
public powers. 

Nor shall the association have the right to transfer to any foreign 
government or public power any part of the lands granted to it by this 
contract. But it shall have the right to make such transfers to private 
parties under the same restrictions. 

The Republic of Costa Rica shall not transfer its rights and privileges 
in respect to the canal to any foreign government or public power. 

The people of all nations shall be invited to contribute the necessary 
capital to the enterprise, and it shall be sufficient for the fulfillment of 
this requirement to publish an advertisement for twenty consecutive 
days in one of the principal daily papers of each of the cities New York, 
London, and Paris. 

Article VIII. 

The capital stock (capital social) of the final company which is to 
operate the canal shall consist of shares of the face value of one hun¬ 
dred dollars each, which shall be issued in such amounts as may be 
deemed necessary. The issue and transfer both of these shares and of 
all the bonds and obligations that the company may issue shall be 
exempt from stamp dues and from all other taxes or imposts now estab¬ 
lished or to be hereafter established in the Republic. 

A five per centum, at least, of the capital stock with which the said 
company may be organized shall be reserved for such Central American 
Governments and citizens as may wish to subscribe. 

As soon as the said company is ready to open subscription books 
notice shall be given by it to the Governments of Costa Rica and 
Nicaragua, which shall invite the other Governments of Central Amer¬ 
ica and through them private parties to subscribe. 

The shares which, within six months, to be counted from the date of 
the notice given to the Government, of the opening of the subscription 
books, are not paid for shall remain at the free disposition of the 
company. 

Article IX. 

The company shall be organized in the same manner and under the 
conditions generally adopted for such companies. Its principal office 
shall be either in the city of New York or in such place as may be 
deemed convenient. 


NICARAGUA CANAL. 


39 


Its first board of directors shall be composed of persons, one-half, at 
least, of whom shall be chosen from those members of the Nicaragua 
Canal Association who were promoters of the enterprise. 

Article X. 

The Government of Costa Rica in its capacity as stockholder in the 
final company as hereinafter provided, shall have the perpetual right 
of appointing one director, who shall be an integral part of the board of 
directors of the said company, with all the rights, privileges, and advan¬ 
tages conferred upon the other directors of said company by the char¬ 
ter, by-laws, and statutes of the company and the laws of the country 
under which it shall organize. 

The Government, in the said capacity of stockholder, shall also have 
the right to take part in the elections that the company may hold. 

Article XI. 

The said final company is bound to keep a representative in Costa 
Rica, vested with ample powers for everything that may be of interest 
to the company, either actively or passively. 

Article XII. 

The association shall have the most ample liberty to select and adopt 
the route which it may deem most convenient, advantageous and 
economical between the two oceans for the excavation, construction, and 
operation of the canal and its dependencies and ports, whether the same 
passes wholly or in part through the territory of Costa Rica or only 
along its border line. 

Should the canal deviate from the River San Juan, in that section of 
the same in which Costa Rica has the right of navigation, the associa¬ 
tion binds itself to establish at such points as the engineers may deem 
proper, a communication between such parts of the San Juan River as 
may not be canalized and the dividing level of the canal, to the end 
of facilitating, without payment of any dues whatever, the navigation 
of Costa Rica vessels between the noncaualized part of the San Juan 
River and the caual, by means of a lock or series of locks suitable for 
the navigation of vessels of six feet draught. 

It is understood that this obligation does not in any manner bind the 
association to place or to keep in navigable condition the lower part of 
the river which these locks may be intended to j)lace in communication 
with the canal. 

Article XIII. 

All expenditures for surveys, construction, maintenance, and opera¬ 
tion of the canal shall be borne by the association without any subven¬ 
tion in money or guaranty of interest on the part the Republic. 

Article XIV. 

The association shall construct, at its expense, and shall keep in 
good condition, two large ports, one on the Atlantic and one on the 
Pacific, at such points or localities as it may select within or without 
the territory of Costa Rica, to serve as termini of the canal; and each 
of them shall have a light house of the first ofder. 


40 


NICARAGUA CANAL. 


Article XV # 

•m 

All tlie area within the territory of Costa Bica, whether at the ports, 
roadsteads, or rivers of the two oceans, which may be necessary for 
the establishment of the canal, its paths, and embankments, or which 
may be occupied and covered by water after raising the dams which are 
to be constructed in the beds of the rivers, or for all necessary devia¬ 
tions to be made, as well as for reservoirs, dikes, spaces about the locks, 
stations, light-houses, and canals, storehouses, buildings, and work¬ 
shops, deposits for materials, and also all those required for the routes, 
service railways, and canals of the same nature, for the transportation 
of materials to the line of the work, and for feeders of the canal; in 
short, all lands and places within the territory of Costa Bica necessary 
to the construction and operation of the canal, as may be laid down in 
the final drawings and plans made by the engineers of the association, 
shall be placed by the State at the disposal of the said association 
under the conditions set forth in the following articles. 

Article XYI. 

Such unappropriated lands as belong to the State shall be given to 
the association without any compensation whatever, and with regard 
to those lands belonging to private parties the State undertakes to 
condemn them should the association demand it. 

The compensation which, in agreement with the laws of Costa Bica, 
may have to be paid in such cases, shall be paid by the association, 
and to it shall be added the amount of the expenses and costs of the 
respective actuations, in such a way that the national treasury shall 
suffer no loss. 

Article XYII. 

In all relating to the condemnation to be made under the provisions 
of the preceding articles the association shall enjoy all the immunities 
and privileges that the laws of the country grant to the State, so that 
the association may not be obliged to pay more than the State would 
under similar circumstances. 

Article XYIII. 

For the construction, maintenance, and operation of the canal the 
association shall have the right to take free of eharge from the lands 
belonging to the State whatever material of a spontaneous production 
of the land that may be found on them, especially timber for construc¬ 
tion and fuel, and limestone, clay for bricks, and earth for fillings that 
are to be made. As regards materials of the said class found on lands 
belonging to private parties, the association shall have the same rights 
and privileges granted by the laws to the State. 

Article XIX. 

If it should be necessary for the association to occupy temporarily 
and during the construction of the canal lands in the territory of Costa 
Bica which are not included in those designated in the Articles XY, 
XVI, and XYIII, it shall not be obliged to pay any compensation for 
them if they are unappropriated lauds. And the State shall not have 


NICARAGUA CANAL. 


41 


the right to sell or dispose of them in any other manner after the asso¬ 
ciation has once determined to occupy them, unless under the reserva¬ 
tion of this right, the limit of which shall be the execution of the works 
of the interoceanic canal. Should the said lands belong to private 
parties, then the association shall enjoy, so far as the temporary occupa¬ 
tion thereof is concerned, all the rights and franchises which the laws 
grant to the State, with the special privilege of occupying them immedi¬ 
ately after the declaration of utility and necessity and after payment of 
the proper compensation, which shall never exceed that which the State 
would be obliged to pay in a similar case. 

Article XX. 

The Republic of Costa Rica desiring to aid efficiently the association 
in this enterprise cedes in fee simple to the said association the public 
lands hereinafter mentioned, in alternate lots, with other similar ones 
which it reserves for itself, to wit: 

1st. On the right or southern bank of the San Juan River, from a 
point three English miles below Castillo Viejo to the confluence of the 
San Carlos, should the canal follow the vailey of the San Juan, lots 
fronting on the canal three English miles front by six deep. 

2d. Between the San Carlos River and the Atlantic, should the canal 
pass wholly or in part through the territory of Costa Rica, or along the 
boundary of Costa Rica, lots of three English miles frontage on the 
canal and four deep. 

3d. Should the route of the Selinas Bay be adopted, lots of two Eng¬ 
lish miles frontage on the canal by two deep in the Costa Rican terri* 
tory crossed by the canal or along which it may run, from the Pacific 
Ocean to a point two English miles distant from the mouth of the Sapoa 
River in the Lake of Nicaragua. 

4th. Should the canal deviate from the San Juan River more than 
four miles towards the interior of Costa Rica, lots to be measured on 
both sides of the canal of two miles front and two deep. Should the 
deviation be less than four miles, then the lots of the northern bank of 
the canal shall have a front of two miles and extend in depth until they 
touch the San Juan River. 

5th. From the Rio Frio to the Sapoa on the south coast of the Lake 
of Nicaragua, at two miles distant from the same and following the 
curve of its bank, lots of two English miles front by two deep. 

6th. In the places where the company in accordance with the Gov¬ 
ernment may select from the existing unappropriated public lands 
twenty-five lots, each two English miles in frontage by four deep. As 
a general rule, at the extremities of the Interoceanic Canal, should the 
same be within the territory of Costa Rica, the opposite lots will be 
allotted, one to the Government and one to the company; but, if this be 
not possible, the first will belong to the Government. 

The State shall vest in the association the possession of said lands 
as soon as the location of the canal is finally determined and its con¬ 
struction begun by the association. 

The rights required by private parties in the lands set forth in the 
preceding clauses are hereby reserved. 

The measurement and setting out of all lands ceded by this contract 
shall be made at the expense of the grantee, with the intervention of 
the Government. 

The final title deeds shall be issued in due proportion as the work 
advances, and not before. 


42 


NICARAGUA CANAL. 


Between the Atlantic and the point three miles below Castillo Viejo 
all parts of the San Juan and Colorado rivers occupied by the canal 
shall be considered, for the purposes of the present article, as a part of 
the said canal. 

It is hereby understood that the whole of the lands transferred to 
the association by Costa Eica, in the different places and in the form 
as set forth in the foregoing article, shall not exceed in amount one- 
fourth of the total amount of lands granted to the company by the 
Government of Nicaragua, according to the contract made by it. 
Should they exceed such amount, the difference shall be deducted by 
reducing the number of lots mentioned in subdivision 5th of this article. 

Article XXI. 

The State reserves the right to occupy, in the several lots of land 
ceded to the association, such space as may be needed for such roads 
and public buildings as it may deem convenient. In the same manner 
it shall have the right to use timber and other building materials which 
may be found on said land whenever they may be necessary for any 
work upon which it may determine. Should these lands become the 
property of private persons by virtue of a transfer made by the com 
pany, and the State should need them for the purpose set forth in this 
article, or for some other purposes, it shall pay their owners for them 
in conformity with the laws, and the expropriated parties shall have no 
right or claim against the association. 

Should the association have made improvements on the lands referred 
to, whether for the purposes of utility, ornament, or pleasure, the State 
shall be bound to compensate it for such damages as it may suffer 
according to appraisals of experts. 

Article XXII. 

Mines of coal, gold, silver, iron, or other metals, and stone quarries 
situated in the lands ceded to the association shall belong to it by 
right without the necessity of previous denunciation, and it shall have 
the right to work them whenever it may deem it convenient, subject 
to the laws of the Eepublic, but such lands as may be transferred by 
the association to private parties shall not enjoy this privilege. 

Article XXIII. 

The association shall also have the right to utilize for the works of 
the canal and its appurtenances the timber in the forests situated in 
the land granted to it by the State from the very moment from which 
it enters into possession of the same under the present contract, the 
acquired rights always being reserved. 

Article XXIV. 

From the day in which the present concession shall be ratified by 
Congress no alienation shall be made of any unappropriated lands 
necessary for the construction of the canal nor of those ceded to the 
association on the banks of the same. Nor shall the said lands be 
leased to the prejudice of the company. However, should the location 
of the canal not be definitely settled when this contract is ratified, the 
line of the canal shall for the purposes of this article be presumed to 
follow the northern boundary line of Costa Rica. 


NICARAGUA CANAL. 


43 


Article XXV. 

The association shall have the right of doing throughout the whole 
extent ot the canal within the territory of Oosta Rica, at the mouths 
of the canal on the two oceans, and in the whole extent of the lands 
which under the present contract have been granted to it according to 
articles 15,16, and 20, all such works as may be necessary for locating, 
leveling, excavating, and dredging the canal, and all other works that 
may be required for the establishment, feediug, operation, preservation, 
and maintenance of the canal. 

The association is especially authorized to make along the line of the 
canal and on the Oosta Rican bank of the San Juan River and its Oosta 
Rican affluents and confluents, as well as on the Costa Rican rivers 
tributary to the Lake of Nicaragua, the lakes or water courses which 
may be utilized in their flow to the Pacific or to the Atlantic; to con- 
struct dikes and dams, make rectifications, dredgings, embankments, 
and deviations; to locate buoys, and in general to do all the works that 
in the opinion of tbe engineers of the association may be deemed indis¬ 
pensable for the construction, feeding, navigation, and operation of tbe 
canal. Tbe embankments, fillings, and dikes which may be made 
within the territory of Oosta Rica, at the mouths of the canal on the 
ports on the two oceans, by using materials resulting from the excava¬ 
tion of the canal, shall belong in fee simple to the association; but the 
Government shall have the right to occupy them in whole or in part 
after compensation made. Should any port of the canal be within tbe 
territory of Costa Rica, tbe association shall not obstruct such port nor 
widen its beaches unless there is absolute necessity to do so, and in 
this case tbe embankments and fillings that it may be necessary to con¬ 
struct in front of said port shall belong to the Republic. 

In general the association shall have the right to use all the lakes 
and rivers of Oosta Rica the waters of which may be necessary in the 
judgment of the engineers of the association to construct and feed the 
canal and to maintain its operations, but this right shall have the follow¬ 
ing restrictions, to wit: 

1st. The navigation of the Costa Rican rivers, which the association 
may dam or otherwise use for tbe benefit of tbe canal, shall remain at 
the termination of tbe respective works in as good condition as it was 
before they were made. 

-2d. In the places where the waters of said rivers may overflow in 
consequence of the erection of dams or other artificial obstructions 
made by the association, the said association shall be obliged to do 
whatever may be practicable to prevent the formation of swamps and 
marshes. 

3d. Such damages as may be caused to private parties in consequence 
of the deviation or elevation of the streams shall be compensated for by 
the association according to appraisals made by experts in conformity 
with the laws of the Republic, but the association shall not be obliged 
to pay more than the State would under similar circumstances. 

Article XXVI. 

The association can not import merchandise into the territory of the 
Republic for the purposes of trafficking with it without paying the cus¬ 
tom duties established by law, but it shall have the right to import free 
from custom duties and of any other imposts whatsoever the articles 
needed for the works of the enterprise, its surveys, explorations, exam- 


44 


NICARAGUA CANAL. 


illation of localities, constructions, use, operation, maintenance, repairs, 
and improvements of the canal, and also for the telegraphic and rail¬ 
road service of the same, and for the works and workshops of the com¬ 
pany, and the said articles may consist of implements, machinery, 
apparatus, coal, limestone of all classes, lime, iron, and other metals, 
whether raw or manufactured, mining powder, dynamite, or any other 
analogous substance. These articles may be transported between what¬ 
ever points they may be needed during tlie work of the construction of 
the canal, and shall be landed and stored free from all local taxes. 

The association shall also have the right to import free from duties 
or imposts, during the work of constructing the canal, such provisions, 
clothing for the workmen, and medicines as may be absolutely neces¬ 
sary for its own consumption. 

Those articles the commerce of which is not free are excepted from 
the privileges granted in this article, and shall remain subject, with the 
exception of gunpowder, dynamite, and other explosives, to such 
requisites and duties as are established by law. 

Article XXYII. 

The vessels that the association may employ as tug boats or for the 
service of the canal shall be free from all imposts or taxes of any kind 
whatever, and also the material to be used for their repair and the fuel 
that they may consume. 

The vessels and their appurtenances, from whatever place they may 
come, for the service of the association shall be exempt from all duties 
and imposts. 

Article XXVIII. 

The Government shall enact such regulations as it may deem neces¬ 
sary to prevent smuggling and for the preservation of public order in 
the region of the canal lying within the territory of Costa Rica or bor¬ 
dering on it and in the waters where it may exert joint jurisdiction. 
The company shall be bound to lend its assistance for the enforcement 
of such regulations. But in the free zone along the margin of the canal, 
as hereinafter provided, measures for the prevention of smuggling shall 
be limited to vigilance on the part of the employee or employees whom 
it may concern, without right to any further measures, either against 
passengers, vessels, or their cargoes, excepting when an attempt at 
smuggling may be discovered; it being the intention of the State that 
there shall be most ample freedom of transit through the canal for per¬ 
sons and property, with the sole limitations established by this contract. 
Consequently, the association shall have the right to unload and reload 
ships in transit at such point as may be necessary in order to make 
repairs or lighten the vessels or shift their cargoes, or on account of 
any accident that unavoidably may render it necessary, without being 
subject thereby to search, exactions, or contributions of any kind, pro¬ 
vided in each case, and before beginning operations, notice is given to 
the nearest custom-house authority. 

Article XXIX. 

The Government shall afford its protection, in conformity with the 
laws of the Republic, to the engineers, contractors, employes, and labor¬ 
ers that may be engaged in the preliminary surveys or in the works of 
construction and operation of the canal. 



NICARAGUA CANAL. 


45 


Article XXX. 

The association shall be exempt from all forced loans and military 
exactions whether in time of peace or of war. The foreign agents or 
employes shall also be exempt from direct taxes, forced loans, and 
military exactions during the time in which they are in the service of 
the canal, but they shall pay the direct taxes established by law in case 
they may become owners of real property or commercial or industrial 
establishments. 

Article XXXI. 

The association may freely introduce into the lands granted to it 
employes and laborers of every race who maybe needed in its works and 
workshops; and it may also introduce immigrants of all nationalities, 
excepting Asiatics and negroes. Both the immigrants and the employes 
and laborers shall be subject to the laws of the Republic and to the 
regulations of the company. The Government assures them aid and 
protection and the enjoyment of their rights and guarantees in con¬ 
formity with the constitution and the national laws during the time 
that they may remain within Costa Rican territory. 

Article XXXII. 

The Government of Costa Rica shall assure the association and its 
agents, under the laws of the Republic, as it does to the other inhabit¬ 
ants, the full enjoyment of the guarantees and rights which the con¬ 
stitution and laws grant to them. Reciprocally, the association and 
its agents bind themselves strictly to respect the laws and regulations 
in force in Costa Rica, and especially to comply with the final decisions 
of the courts, without considering themselves vested with other rights 
than those granted by law to Costa Rican citizens. 

Article XXXIII. 

The Government shall establish all along the line of the canal which 
may be within the territory of Costa Rica or along its frontier or in the 
waters appertaining to it in ownership or joint jurisdiction, such police 
stations and revenue offices as in its judgment may be necessary for 
the preservation of order in the region of the canal and.for the observ¬ 
ance of the fiscal laws of the Republic. 

The expenses incident to said services, including those of buildings, 
salaries, wages, and allowances of the employes and transportation of 
the forces, and which may be in excess of such as are now borne by the 
Government for the custom-house actually established at the mouth of 
the San Carlos, or on any other point that may be crossed by the canal, 
shall be paid to the public treasury by the company on such terms and 
conditions as may be established hereafter, taking into consideration 
the requirements and necessities of such services. 

The association shall also have the right to establish guards and watch¬ 
men for the service of the canal and the enforcement of its regulations. 

Article XXXIV. 

All contracts in regard to the works of the canal that the association 
may enter into in foreign countries shall oe valid and effective, and shall 
have full force and effect in Costa Rica, provided they do not violate the 
laws of the Republic. 


46 


NICARAGUA CANAL. 


Article XXXY. 

The association shall be exempt during the period of this concession 
both in time of peace and in time of war from all kinds of taxes upon 
the real estate that it may acquire by virtue of this contract and from 
all kinds of direct taxes, local charges, or any other imposts relating to 
the property and use of the canal, or of its buildings and the construc¬ 
tion and dependencies thereof, all along its extent, including those 
situated in the ports and maritime establishments on the two oceans. 

This franchise is not transferable to the purchasers of the real estate 
which the association may alienate under this grant. 

Article XXXYI. 

The Republic of Costa Rica shall not establish any tonnage, anchor¬ 
age, pilot, or light house dues or any other charges of any kind what¬ 
soever, upon vessels of any class whatever or upon the merchandise, 
baggage, and passengers which may pass through the canal from one 
ocean to the other; all such dues are reserved for the benefit of the 
association as provided for in article 39. 

Article XXXYII. 

For the purpose of securing the most ample liberty of transit of per¬ 
sons and iiroperty a free zone shall be established on each side of the 
canal, and the width thereof shall be 90 meters and 288 millimeters, 
measured from the water’s edge in the canal. 

All traffic declared illegal by the laws of the Republic shall, however, 
be prohibited within the said zone and the revenue authorities whose 
duty it is to watch for and prevent smuggling shall act in conformity 
with the stipulations of Article XXYIII. 

It is expressly agreed that every vessel that may pass through the 
part of the canal which may be within the territory of Costa Rica or 
along its borders or in waters over which it exerts co-jurisdiction shall 
carry on board an officer appointed by the Government whenever the 
authorities may deem it convenient, and that officer shall act in con¬ 
formity with the law should he discover that it is being violated. 

The two ports to be constructed for the entrance and*exit of the canal 
on both oceans, which may be wholly or in part within the territory or 
in waters of Costa Rica, shall be declared free ports and shall be 
recognized as such from the opening of the canal to the end of this 
concession. 

The Government, in agreement with the company, shall establish, by 
means of a special decree, the limits of this franchise, which shall 
never extend beyond the \\ aters of the ports comprised between the 
mouth of the canal and the entrance of said ports. 

All merchandise that shall *be loaded or discharged at any point of 
the canal within the territory of Costa Rica, and intended for internal 
commerce, shall pay the import and export duties fixed by the revenue 
laws of the State. 

Article XXXYIII. 

For the proper administration of the canal and its dependencies, and 
in order to facilitate its construction and operation, the association 
shall establish the proper regulations, which shall be binding upon 


NICARAGUA CANAL. 


47 

every person who may be found in its waters or in its dependencies: 
the sole reservation being that the rights and sovereignty of the State 
be respected. 

It is understood that the association, in the exercise of the powers 
conferred by this article, shall not make other regulations than those 
necessary for the administration and particular management of the 
canal; and that, before carrying them into effect, they shall be sub¬ 
mitted for the approval of the Government. The State shall lend the 
aid of its authority to enforce these regulations. 

Article XXXIX. 

By way of compensation for the expenses incurred in the surveys, 
construction, maintenance, and operation of the canal, or any part 
thereof, during the period of said privilege, the said association shall 
have the right to establish and collect for the passage of all kinds of 
ships, vessels, travelers, and merchandise through the canal and in the 
waters and ports pertaining to it, such dues of navigation, tonnage, 
pilotage, towage, storage, lay days, anchorage, light, roadsteads, wharf¬ 
age, hospital dues, and any other similar charges in conformity with 
the tariffs to be established by it in accordance with article 45 of this 
contract. 

These tariffs may be modified by the association at any time, on con¬ 
dition that all modifications that may be introduced in it shall be pre¬ 
viously communicated to the Government, which, in case of finding 
them within the limits established by said article 45, shall cause them 
to be complied with as if they were regulations enacted by itself. 

The payment of all the tariff dues shall be exacted without any 
exception or preference and under identical conditions from all vessels, 
whatever be the place they come from or their nationality, with the 
exception stipulated in the following article. 

Article XL. 

In compensation for the privileges and concessions that Costa Eica 
grants by this contract, it is hereby stipulated that the Eepublic shall 
enjoy the special privilege that Costa Eican vessels, navigating under 
the flag of Costa Iiica, shall be entitled to navigate the canal at a reduc¬ 
tion of fifty per centum of the general tariff while engaged in the 
coasting trade or in the reciprocal trade with the other republics of 
Central America. 

To enjoy this privilege, the said vessels shall be necessarily of the 
register of the Eepublic, and belong to citizens of the same. 

A reduction of fifty per centum of the general tariff is also granted 
to all vessels that begin their voyage for a foreign country at any of 
the ports belonging to the Eepublic with a cargo wholly consisting of 
products of the country. 

Costa Eican vessels of war and revenue cutters shall pay no dues in 
passing through the canal. No dues shall be paid by the vessels of the 
National Eegister navigating either Costa Eican waters connected with 
the canal or the canal itself, without passing out of the locks, but said 
vessels are not in any way to obstruct the free navigation of the canal. 

Costa Eica, on its part, shall not object to the enjoyment by Nicara¬ 
guan ships of the advantage granted in this article to those of Costa 
Eica, provided that Nicaragua, on its part, consents that the ships of 
Costa Eica shall enjoy in Nicaraguan waters the said privilege. 


48 


NICARAGUA CANAL. 


All the concessions to which this article refers shall be extended to 
the other Republics of Central America, or any of them, whenever 
Costa Rica and .Nicaragua shall tind themselves free from international 
obligations which may prevent it, or whenever one or more of said 
Republics shall form a single nation with Costa Rica. 

Article XLI. 

In case it may be possible to utilize the waters of the canal and its 
dependencies for the irrigation of plantations, gardens, and streets, or 
for the supply of towns that may be without it, or as motive power for 
private enterprises, the company shall have the power to supply it, col¬ 
lecting dues in proportion to the amount furnished, according to the 
tariff that it may establish in agreement with the Government. 

\RTICLE XLII. 

The association shall undertake at its expense the final surveys of the 
ground and the location of the line of the canal by a commission of 
competent engineers. The Government of Costa Rica shall have the 
right of visiting and inspecting the final surveys which are in progress, 
and those already completed by an engineer appointed by said Govern¬ 
ment, and whose salary shall be paid by the association, the amount 
thereof to be fixed hereafter by special agreement between the Govern¬ 
ment and the company. 

A period of two years and a half, to be counted from the date of the 
ratification of this contract, is granted the association for the final 
surveys of the canal, and within the said time the association shall 
have to make the said final surveys, organize the company which is to 
carry on the work, and begin the work of construction. 

The work of construction shall be understood to have commenced if 
within three years after its inception two millions of dollars have been 
expended on it. 

The period herein provided for shall admit of extension by the Repub¬ 
lic at the request of the association and upon grounds of justice, in the 
judgment of the Government. 

Article XLIII. 

A term of ten years is also granted to the association for the con¬ 
struction, completion, and opening to traffic the canal for maritime 
navigation. However, should events of main force arise, duly justified 
and sufficient to impede the regular progress of the works during the 
period of the said ten years, an extension shall be granted equal in 
duration to the time that may have been lost by such delays. 

If at the expiration of the ten years aforesaid the works should not 
be completed so as to have the maritime communication between the 
two oceans opened, in consideration of the great capital the company 
may have invested in the enterprise, and the good will and ability it 
may have shown and the difficulties encountered, the republic binds 
itself to grant a new extension. 

Article XLIY. 

t 

As a guaranty of the fulfillment of the obligations which the final 
company which is to construct the canal incurs in accordance with 


NICARAGUA CANAL. 


49 


article 42, it shall deposit to the order of the Government of Costa Rica, 
in a bank or in a mercantile house in this city, or with an agent which 
the government may designate, immediately after the certificates are 
issued, one thousand shares of its capital stock of the nominal value of 
$100 each. The said one thousand shares of capital stock shall be con¬ 
sidered an advance to the government of the payment of the police and 
revenue expenses to be made under article 33, and the association shall 
be credited with the actual value of said shares at the time such pay¬ 
ments are made. 

Article XLY. 

In consideration of the valuable privileges, franchises, and conces¬ 
sions granted by virtue of this contract to the association, the Repub¬ 
lic shall receive in shares, certificates, or other values representing the 
capital stock of the final company, an amount equal to one and one- 
half per centum of the total amount of issue of said capital stock, in 
shares or certificates of $100 each. This sum shall in .no event be less 
than $1,500,000. Said shares shall be considered as fully paid up and 
two-thirds thereof shall not be transferable. All these shares shall 
participate in the benefits, interest, distributions, dividends, amortiza¬ 
tions, rights, privileges, and all other advantages granted to paid up 
shares, without any difference whatever. These shares, together with 
the other privileges herein granted by the association to the Govern¬ 
ment, shall be in full compensation to the Republic for all public unap- 
*propriated lands that may be flooded and for all the privileges and 
concession conferred by this contract, and shall cover completely all 
claims of this description on the part of the state against the associa¬ 
tion or the final company. The shares to which this article refers shall 
be delivered to the agent appointed by the Government for this purpose 
as soon as the company may be ready to issue certificates of its capital. 

Article XL VI. 

From the earnings of the enterprise the company shall take, in the 
first place, the necessary amount to cover all the expenses for mainte¬ 
nance, operation, and administration; all the suras necessary to secure 
the interest, w r hich shall not exceed six per centum, and the amortiza¬ 
tion of the obligations and of the shares, and what remains shall form 
the net profits, of which at least eighty per centum (80 per cent) shall be 
divided among the shareholders, it being understood that after the lapsn 
of ten years after the completion of the canal, the company shall in no 
case divide among its shareholders in payment of dividends, directly 
or indirectly, by issue of shares or otherwise, more than fifteen per 
centum (15 per cent) annually or in this proportion, from dues collected 
from the aforesaid canal; and where it shall appear that these dues 
yield a greater profit, they shall be reduced to the fixed limit of fifteen 
per cent per annum. 

Article XLYII. 

he present concession shall be forfeited: 

1st. Through the failure on the part of the company to comply with 
any one of the conditions contained in Articles YU, XLII, and XLIII. 

2d. If the service of the canal, after it is completed, is interrupted 
for six months, unless in case of unforeseen accidents or main force. 

When the concessions shall have been declared forfeited fromwhich- 

S. Doc. 291-4 



50 


NICARAGUA CANAL. 


ever of these causes, the public lands granted by virtue of the present 
contract shall revert to the Eepublic in whatever condition they may 
be, and without compensation, such lands as may have been alienated 
by the company with the formalities prescribed by law shall be excepted, 
provided that such alienations shall not have taken place within the 
six months preceding the date on which the company may have become 
legally liable to the penalty herein established. 

Article XLVIII. 

At the expiration of the ninety-nine years stipulated in this conces¬ 
sion, or in the event of the forfeiture expressed in the preceding article, 
the Republic shall enter into the possession in perpetuity of that part 
of the canal, its warehouses, stations, and other establishments used for 
the management thereof that may be found within the national territory. 
Such works as may be found in waters in which the Republic has joint 
sovereignty shall belong to her in joint ownership. And in regard to 
such parts of the canal or of the waters thereof in which Costa Rica has 
not the eminent domain, but simply the right of use and free naviga¬ 
tion, the Republic, at the expiration of the ninety-nine years, or in the 
cases of forfeiture above named, shall retain in perpetuity the said 
rights of use and free navigation. '1 he Republic shall not be obliged to 
pay to the company any compensation for the same. 

There shall be excepted from this condition the vessels belonging to 
the company, its stores of coal and other materials, its mechanical work 
shops, its floating capital and reserve fund, and at the expiration of the 
said ninety-nine years also the lands ceded to it by the State under the 
present contract, excepting those in which the works indicated in the 
first part of this article may be found established, which will become 
the property of the State, with their immediate dependencies as neces¬ 
sary for the service of the canal and an integral part of the same. 

But the company shall have the right, at the expiration of the afore¬ 
said term of ninety-nine years, to the full enjoyment and a free use 
and control of the canal and such parts thereof as may be within the 
territory of Costa Rica, with all the privileges and advantages granted 
by this concession in the capacity of lessee for a second period of ninety- 
nine years, upon payment to the Government of Costa Rica of six and 
one-quarter per centum of the annual net profits of the enterprise, 
besides the dividends due to it for its share in the capital stock. 

The company shall have the right to fix at its discretion the dues 
referred to in article 39 of this concession, so that the shareholders, 
after the payment of 31 \ per cent is deducted, shall still receive divi¬ 
dends of ten per cent per annum on the whole capital. 

At the expiration of this second period of ninety-nine years the Gov¬ 
ernment shall enter into perpetual possession of the canal and the other 
property referred to in the first part of this article; and this delivery 
shall also embrace everything excluded in the said first part, except 
the lands ceded to the association by this contract and the reserve and 
sinking fund. 

The failure to comply with any of the conditions of the lease shall 
terminate it, and the state shall enter into the possession of the part of 
the canal which corresponds to it, owing to it being situated in Costa 
Rican territory or in the places in which Costa Rica is joint owner, and 
also of the other works which belong to the canal, in accordance with 
the provisions of the preceding paragraph. 


NICARAGUA CANAL. 


51 


Article XLIX. 

Any misunderstanding that may arise between the Republic and the 
company in regard to the interpretation of the present stipulations shall 
be submitted to a court ot arbitrators, composed of four members, two 
of whom shall be appointed by the state and two by the company. 

These arbitrators shall be designated by each party within the period 
ot four months from the day on which one of them shall give notice to 
the other in writing of the want of agreement on the point at issue. 
Should one of the parties allow this period to lapse it shall be consid¬ 
ered as assenting to the opinion or claim of the other. 

The majority of the votes of the arbitrators shall finally decide with¬ 
out recourse. In case of a tie vote the arbitrators shall appoint, by 
mutual consent, a fifth person, who shall decide, and in case of their 
default the respective parties will appoint him. If they can not agree 
to such appointment they shall draw by lot the names of the diplo¬ 
matic representatives accredited to Costa Rica, and the first one drawn 
out shall exercise the functions of the fifth arbitrator. He shall concur 
on one of the two opinions, and what may be so decided shall be final 
and without recourse of any kind. If the fifth arbitrator should fail, 
the second person drawn shall exercise these functions, and so on suc¬ 
cessively until the decision is reached. 

Prior to the initiation of the works of opening the canal the Gov¬ 
ernment, in concurrence with the company, shall formulate a set of 
rules to be observed by the arbitrators in all matters relating to 
procedure. 

All questions between the association and private parties residing in 
Costa Rica shall be determined by the ordinary courts of Costa Rica in 
conformity with the legislation of the Republic. In matters pertaining 
to parties not residing in Costa Rica the rules of private international 
law shall be observed. 

Article L. 

This contract, after being approved by the Hon. General President 
of the Republic, shall be submitted to the supreme legislative power 
for the purpose that if they deem it convenient they should impart to 
it the necessary ratification, and in case such approval is not obtained 
the Nicaragua Canal Association will be released from all the obliga¬ 
tions to which it is bound by it. Such ratification or non ratification 
shall be made within one hundred and twenty days from this date. 

In witness whereof the undersigned have set their hands to four 
copies of the present contract, two for each party, in San Jose de Costa 
Rica, 31st July, 1888. 

Pedro Perez Zeled6n. 

A. G. Menocal. 

Palace of the President, 

San Jose , July 31 , 1888. 

In consideration that the foregoing contract agrees with the instruc¬ 
tions given for its celebration to the honorable secretary of state, who 
authorizes it, it is hereby approved in all its parts for the purpose that 
it may be submitted to the deliberation of the Constitutional Congress. 

Countersigned by his honor the President of the Republic. 

Perez Zeled6n. 

Article 2.—The contract to which the foregoing article refers is 
hereby exempted from the payment of stamp duties. 

S. Doc. 20-5 


52 


NICARAGUA CANAL. 


To the executive power : 

Given in the hall of sessions of the national palace in San Jose, on 
the 9th day of August, 1888. 

A. Esquivel, President. 

Manuel J. Jimenez, Secretary . 
Felix Gonzalez, Vice-Secretary. 


Therefore be it executed. 


Presidential Palace, 

San Jose , August 9 , 1888, 

Bernardo Soto. 


The secretary of state of the department of public works: 

Maximo Fernandez. 


CONTRACT RELATING TO THE NICARAGUA CANAL BETWEEN 

THE GOVERNMENT OF COSTA RICA AND MR. A. G. MENOCAL IN 

REPRESENTATION OF THE NICARAGUA CANAL ASSOCIATION 

OF NEW YORK. 

This contract was approved by the President of Costa Eica on the 
31st of July and ratified by the Costa Eican Congress on the 9th of 
August, 1888. 

The undersigned, Pedro Perez Zeledon, secretary of state in the 
department of public works, specially authorized by the President of 
the Eepublic to make, ad referendum, the present contract, of the one 
part, and Aniceto G. Menocal, representative of the Nicaragua Canal 
Association, with sufficient power therefor and also authorized for that 
purpose by the executive committee of the same, of the other part, 
have revised the canal contract made in Washington the 17th day of 
May ultimo by the first above named in his capacity of envoy extra¬ 
ordinary and minister plenipotentiary from Costa Eica, near the Gov¬ 
ernment of the United States of America, and Mr. Hiram Hitchcock, 
president of the said association, which contract, with the modifica¬ 
tions now agreed to by the undersigned, is as follows: 

Article 1 . The Eepublic of Costa Eica grants to the Nicaragua 
Canal Association, their successors and assigns, the exclusive privilege 
to excavate and to operate a maritime canal between the Atlantic and 
Pacific oceans, wholly or in part in the territory of said Eepublic, or 
running along the whole or a part of the frontier line of the Eepublic 
of Nicaragua. 

This contract shall have full effect between the contracting parties 
by the fact alone that Costa Eican waters (or at least those over which 
Costa Eica has joint dominion or the right of use and navigation) may 
be utilized or occupied by the association for the work of the canal 
referred to or for any of its ports on either ocean. % 

Whenever the word “association” is used in the present document 
it is to be understood to mean the “Nicaragua Canal Association,” its 
successors and assigns. 

Article 2. The canal shall be of sufficient dimensions for the free 
and commodious transit of vessels of the size of the large steamers in 
use in navigation between Europe and America. 

Article 3. The State of Costa Eica declares this work one of public 
utility. 



NICARAGUA CANAL. 


53 


Article 4. The duration of the present concession shall be ninety- 
lime years, counting from the day upon which the canal shall be opened 
to universal traffic. 

During the same period the association shall have the right to con¬ 
struct and to operate with, in the territory of Costa Rica, a railway 
along the canal, in its full length or such parts of it as may be deemed 
requisite for the better service and operation of the work. 

The Republic binds itself not to grant any subsequent concession to 
open a canal between the two oceans during the term of this concession. 

During the same period it will not grant concessions for railways from 
sea to sea, within a zone of 25 miles along a line of the canal, which 
might enter into competition with the canal in the traffic between for¬ 
eign nations. This restriction shall not prevent the construction of 
new railway lines which Costa Rica may find it convenient to build up 
to the canal or to any other point of the northern frontier of the Repub¬ 
lic, either to connect or not with other railways. 

Article 5. The asssociation shall have the right to construct such 
telegraph lines as may be deemed necessary for the construction, man¬ 
agement, and operation of the canal. 

The Government may use the telegraph lines of the association from 
and to each one of the stations on the line from sea to sea without any 
remuneration therefor to the association. 

Article 6 . The Government of the Republic declares and accepts 
as such, during the terms of this concession, the ports at each terminus 
of the canal and the canal itself from sea to sea to be neutral; and 
that consequently, in case of war between other nations or between 
one or more of the latter and Costa Rica, the transit through the canal 
shall not for such cause be interrupted, and that merchant vessels and 
persons of all nationalities of the world may freely enter said ports 
and pass through the canal without molestation or detention. 

In general, all vessels may pass freely through the canal without dis¬ 
tinction, exclusion, or preference as to persons or nationalities upon the 
payment of the dues and the observance of the regulations established 
by the association for the use of said canal and its dependencies. In 
regard to the transit of foreign troops and vessels of war, the condi¬ 
tions established or which may hereafter be established by treaties 
between Costa Rica and other nations, or by international law, shall be 
respected, but the entrance of the canal shall be rigorously prohibited 
to vessels of war of any nation which may be at war with Costa Rica 
or with any other of the Republics of Central America. 

Costa Rica will endeavor to obtain from the nations which guarantee 
the neutrality of the canal that in the treaties entered into for that pur¬ 
pose they will bind themselves to guarantee the same neutral charac¬ 
ter to a free zone parallel to the canal and a maritime zone on both 
oceans, the extent of which shall be fixed in the respective conventions. 

Article 7. The present concession shall be transferable only to the 
company or companies organized with the object of constructing and 
operating the canal, and in no case to any foreign government or pub¬ 
lic power. Nor shall the association have the right to transfer to any 
foreign government or public power any part of the lands granted to it 
by this contract. But it shall have the right to make such transfers to 
private parties under the same restrictions. 

The Republic of Costa Rica shall not cede its rights and privileges 
respecting the canal to any foreign government or public power. 

All nations shall be invited to take part in forming the capital 
required for this enterprise, and with that object the publication of a 


54 


NICARAGUA CANAL. 


notice for twenty consecutive days in one of the principal daily news¬ 
papers of each of the cities of New York, London, and Paris shall be 
sufficient. 

Article 8. The capital stock of the company definitively organized 
for the operation of the canal shall consist of shares of the nominal 
value of $100 each, which shall be issued in such amounts as may be 
deemed requisite. The emission and transfer of these shares and of all 
the bonds and obligations which the company may issue shall be exempt 
from stamp and any other import established, or that may be established, 
in the Republic. 

From the capital stock with which the company shall be organized, 
at least 5 per cent shall be reserved for the Government and citizens of 
Central America who may wish to subscribe. 

As soon as the said company is ready to open subscription books, 
notice shall be given by it to the Governments of Costa Rica and Nica¬ 
ragua, which shall invite the other Governments of Central America 
and through them private parties to subscribe. 

The shares which within six months from the date upon which notice 
has been given to the Government of the opening of the subscription 
books shall not have been paid for shall remain at the free disposal of 
the company. 

Article 9. The company shall be organized in the form and with 
the conditions usually adopted for associations of this class. Its prin¬ 
cipal office shall be established in New York, or wherever it may be 
deemed most convenient. The half, at least, of the first board of direct¬ 
ors shall be selected from among the members of the Nicaragua Canal 
Association, of which they were the founders. 

Article 10. The Government of Costa Rica, in its character of 
stockholder in the permanent company, as hereinafter stipulated, shall 
have the perpetual right to name one director, who shall be one of the 
board of directors of the company, with all the rights, privileges, and 
advantages which the charter, statutes, and by-laws and the laws of 
the nation under which it is organized confer upon the other directors. 
The Government shall also have the right in its character of stock¬ 
holder to take a part in the elections of the company. 

Article 11. The permanent company shall be bound to maintain 
a representative in Costa Rica invested with ample powers for all that 
may be of active or passive interest to the enterprise. 

Article 12. The association shall have the most ample liberty to 
select and adopt the route which may be deemed the most suitable, 
advantageous, and economical between the two oceans for the excava¬ 
tion, construction, and operation of the canal and its dependencies and 
ports, whether such route shall pass wholly or in part through Costa 
Rican territory or only alongside of it. 

If the canal shall deviate from the San Juan River in the section over 
which Costa Rica has the right of navigation the Government of Costa 
Rica reserves the right to require the association to establish at places 
which the engineers of the association shall consider suitable a com¬ 
munication between the uncanalized part of the San Juan and the 
dividing level of the canal by means of a lock or locks sufficient for 
the navigation of vessels of 6 feet draft. It is understood that this 
obligation in no way binds the association to place or to keep in a 
navigable condition the lower part of the river, for the communication 
of which with the canal the locks are to be employed. 

Article 13. All the expenses for surveys, construction, preserva¬ 
tion, and operation of the canal shall be paid by the association, with- 


NICARAGUA CANAL. 55 

out any subvention in money or guaranty of interests on tbe part of 
the Republic. 

Article 14. The association shall construct and maintain in good 
condition two large ports to serve as the termini of the canal on the 
Atlantic and on the Pacific at the places the association shall select, 
within or without the territory of Costa Rica. Each port shall have a 
light-house of the first order. 

Article 15. All the area, whether within the territory of Costa 
Rica or in the ports, roadsteads, or rivers of the two oceans, necessary 
for the construction of the canal, its slopes, and declivities; for the 
area occupied by the waters overflowing from the dams to be built on 
the beds of the rivers; for the indispensable deviations of streams 
which may have to be made, as also for the reservoirs, dikes, spaces 
around the locks, stations, light-houses, warehouses, buildings, shops, 
and depots for materials; for the routes, railways, and canals for con¬ 
struction service; for the transportation of all materials to the line of 
work, and for feeders of the canal; in short, all the lands and places 
within the territory of Costa Rica necessary for the construction and 
operation of the canal according to the tracings and plans as laid down 
by the engineers of the association shall be placed by the State at the 
disposal of the association under the conditions established in the fol* 
lowing articles. 

Article 16. Public lands belonging to the State shall be given to 
the association without any indemnity; and as regards private prop¬ 
erty, the State will undertake its expropriation should the association 
ask it. The indemnity to which it may give rise, in conformity with 
the laws of Costa Rica, shall be paid by the association, together with 
the amount of costs and expenses, so that the national treasury shall 
incur no expense. 

Article 17. In all expropriations made in accordance with the fore¬ 
going article, the State shall assure to the association enjoyment of the 
same immunity and privileges that the legislation of the country 
accords to it; so that the association shall not be obliged to pay more 
than the State would have to pay under analogous circumstances. 

Article 18. The association shall have the right to take gratui¬ 
tously from the lands belonging to the State, for the construction, 
preservation, and operating of the canal, any material found thereon, 
especially woods for construction and for fuel, lime, stone, clay for 
bricks, and earth for the gradings that may have to be made. 

In regard to the same materials, before mentioned, existing on private 
lands, the associations shall enjoy the same rights and privileges which 
by law the State enjoys. 

Article 19. In case the association should find it necessary to occupy, 
temporarily or during the construction of the canal lands not comprised 
in those designated in articles 15, 16, and 18, it shall not be required to 
pay anything therefor if they are public lands* and the State shall not 
sell or dispose of them in any way, should the association determine to 
hold them, without reserving this right to the association, the limit 
whereof shall be the completion of the Interoceanic Canal. If the 
lands should belong to private individuals, the association shall enjoy 
as regards their temporary occupation all the rights and privileges that 
the laws concede to the State, and may enter into immediate possession 
after the declaration of utility and necessity, and of the indemnity 
therefor, which shall not exceed that which the State would in such 
case be bound to pay. 

Article 20. The Republic of Costa Rica being anxious to aid the 


56 


NICARAGUA CANAL. 


association efficiently in this enterprise cedes to it in fee simple the pub¬ 
lic lands hereinafter mentioned in alternate lots, reserving others of 
equal dimensions, to wit: 

First. On the right or south bank of the San Juan Eiver to 3 miles 
beyond “Castillo Viejo” (English miles are understood) to the point 
of its confluence with the San Carlos, should the canal follow the basin 
of the San Juan, lots of 3 miles frontage on the canal and of 3 English 
miles wide by 6 miles in depth. 

Second. Between the Eiver San Carlos and the Atlantic, should the 
canal pass wholly or in part through Costa Eican territory, or in the 
line of the Costa Eicafrontier, lots of 3 English miles in width fronting 
the canal and 4 in depth. 

Third. In case the route by way of the Bay of Salinas should be 
adopted, lots of 2 miles in width fronting the canal and 2 in depth, in 
the Costa Eican territory which the canal crosses or along which it 
runs, from the Pacific Ocean to a point distant 2 English miles from the 
mouth of the Sapoa Eiver on Lake Nicaragua. 

Fourth. In case the canal should deviate from the San Juan Eiver 
more than 4 miles upon the territory of Costa Eica, lots of 2 miles in 
width by 2 in depth shall be measured on both sides of the canal. If 
the divergence should be less than 4 miles, the lots on the north side 
of the canal shall be 2 miles in width and shall extend in depth to the 
San Juan Eiver. 

Fifth. From Eio Frio to the Sapoa lots of 2 English miles in width 
by 2 in depth to the south of Lake Nicaragua, to 2 miles distance from 
the same lake and following the curves of its shores. 

Sixth. Twenty-five lots of 2 English miles in width and 4 in depth 
each of the public lands which the company shall select in concurrence 
with the Government. 

As a general rule, at the termini of the Interoceanic Canal, in case 
these should be within the territory of Costa Eica, the opposite lots 
shall be awarded, one to the Government and the other to the company; 
and if this should not be possible, the first in order shall belong to 
the Government. 

The State shall place the association in possession of the lands as 
soon as the line of the canal shall have been definitively fixed and the 
work of construction shall have commenced. The rights acquired by 
individuals to the lands mentioned in the foregoing articles are reserved. 

The measurement and demarcation of all the lands ceded by this con¬ 
tract shall be made with the intervention of the Government and at the 
expense of the grantees. 

The final titles shall not be issued save according as the work upon 
the canal progresses and in due proportion thereto. 

From the Atlantic to 3 miles from “ Castillo Viejo” the parts of the 
rivers San Juan and Colorado which the canal may occupy shall be 
considered as a part of the same for the purposes of this article. 

It is understood that the total of the lands ceded by Costa Eica to 
the association, at different points and in the form expressed in the 
foregoing paragraphs, shall not exceed the fourth part of the total of 
lands conceded to the company by the Government of Nicaragua, 
according to the contract made by them, and in case it should exceed 
the difference shall be deducted by reducing the number of lots men¬ 
tioned in the fifth clause of this article. 

Article 21. The State reserves the right to occupy in the several 
lots ceded to the association the areas it may require for roads and 


NICARAGUA CANAL. 


57 


public ouildings. It shall also have the right to make use of the woods 
and other building materials found on said lands whenever required 
for construction. With these lands, in virtue of a transfer by the com¬ 
pany, become the property of individuals, should the State require them 
for the purposes mentioned in this article, or for any other, it shall com¬ 
pensate the owners in conformity with the laws, and the owners shall 
have no claim against the association. In case the company should 
have improved the lands, either for purposes of utility, ornament, or 
recreation, the State shall be bound to indemnify it for the damages it 
has sustained upon a just appraisement of experts. 

Article 22 . Mines of coal, gold, silver, iron, or other metals and 
quarries found on the lands ceded to the association belong to it by 
right without previous denouncement, and may be worked at its option, 
in accordance with the laws of the Republic 5 but the lands which the 
association transfer to individuals shall not enjoy this exemption. 

Article 23. From the moment upon which it enters into possession 
thereof the association shall have the right to make use of, for the 
works of the canal and its dependencies, the timber found in the for¬ 
ests, situate on the lands ceded to it by the State, without prejudice to 
previously acquired rights. 

Article 24. From the day upon which this concession shall be rati¬ 
fied by Congress none of the public lands which may be necessary for 
the construction of the canal, nor those ceded to the association along 
its margin, shall be sold; neither shall any of said lands be leased to 
the prejudice of the company. Notwithstanding, if at the time of the 
ratification of the contract the line of the canal should not have been 
definitively determined, it will be presumed that for the purposes of the 
present article such line will follow the northern frontier of Costa Rica. 

Article 25. The association shall have the right throughout the 
extent of the canal, within the territory of Costa Rica, at the mouth 
of the canal in the two oceans and in all the lands ceded by the present 
contract, as per articles 15, 16, and 20, to perform whatever works may 
be necessary for locating, leveling, excavating, and dredging, as also 
other works requisite for the establishment, feeding, operating, preser¬ 
vation, and maintenance of the canal. 

Along the line of the canal and upon the Costa Rican margin of the 
River San Juan, its affluents and confluents in Costa Rica, as also the 
Costa Rican tributaries of Lake Nicaragua, the association is specially 
authorized to make use of the lakes and streams which can be utilized 
in their flows to the Pacific or Atlantic for the construction of dams 
and dikes, for rectifications, dredgings, embankments, location of buoys, 
and generally for all the works which the engineers of the association may 
find necessary for the construction, feeding, navigation, and use of the 
canal. The gradings, fillings, and dikes made in Costa Rican territory 
and at the mouths of the canal in the ports of both oceans from the 
materials taken from the canal excavations shall belong exclusively to 
the association, but the Government shall have the right upon indemnity 
therefor to make use of the same wholly or in part. 

If any of the ports of the canal should be within Costa Rican terri¬ 
tory the company shall not obstruct nor extend the shores thereof unless 
absolutely necessary. I 11 such case, the gradings and fillings that it 
may be necessary to make opposite to the port shall belong to the 
Republic. 

In general terms, the association shall have the right to use all the 
lakes and rivers of Costa Rica whose waters may be necessary, in the 


58 


NICARAGUA CANAL. 


judgment of the engineers of the association, for the construction and 
feeding of the canal, but this right has the following limitations: 

First. The navigation of the Gosta Bican rivers, which the associa¬ 
tion may dam up or use in any way for the canal, shall, at the termina¬ 
tion of their respective works, be in as good condition as before their 
execution. 

Second. At places where the waters of said rivers overflow in conse¬ 
quence of the dams or other artificial obstructions made by the associa¬ 
tion the latter shall be bound to do everything practicable to prevent 
the formation of pools and swamps. 

Third. The damages done to individuals by the deviation or elevation 
of streams shall be compensated by the association, according to ap¬ 
praisement by experts, in conformity with the laws of the Bepublic, but 
the association shall not be bound to pay more than the State would 
pay under analogous circumstances. 

Article 26. The association shall not import into the territory of the 
Bepublic any merchandise intended for sale except upon the payment 
of the legal customs duties; but it may import lree of duties and any 
impost articles needed for the works of the canal, for surveys, examina¬ 
tions of localities, inspections, constructions, use, development, repairs 
and improvements of the canal, and for its telegraph and railway serv¬ 
ices, and for its works and workshops. Such articles may consist of 
tools, machinery, apparatus, coal, limestone of all kinds, lime, iron and 
other metals, unmanufactured and 'manufactured, blasting powder, 
dynamite, and other analogous articles. These articles may be trans¬ 
ported between different points as required during the work of canal 
construction and discharged and stored free of all local tax. 

During the construction of the canal the association may import free 
of duties provisions, clothing for the laborers, and medicines indispen¬ 
sably necessary for its own use. 

With the exception of powder, dynamite, and other explosive sub¬ 
stances, articles in which trade is restricted are not included in this 
concession, but remain subject to the requirements and imposts estab¬ 
lished by the laws. 

Article 27. The vessels employed by the association as tugs or for 
canal service shall be free of all taxes and imposts whatsoever, as shall 
also the fuel used and materials for their repairs. 

All vessels and their equipments intended for the service of the asso¬ 
ciation shall be free of dues or imposts, whatever may be the place they 
come from. 

Article 28. The Government shall make such regulations as it may 
deem necessary to prevent smuggling and to maintain public order in 
the region of the canal, which may be within Costa Bican territory or 
bordering on it, or in the waters over which it exercises joint juris¬ 
diction. 

The association shall be bound to assist in carrying out such regula¬ 
tions. But in the free zone, along the banks of the canal, as herein¬ 
after stipulated, the measures adopted to prevent smuggling shall be 
limited to watchfulness on the part of employee and employees per¬ 
forming that duty; and no other measures affecting passengers, vessels, 
or their cargoes shall be taken except when an attempt to smuggle has 
been discovered, it being the purpose of the State that on the canal 
there shall be the most ample liberty of transit for persons and property, 
with the limitations only established by this contract. The company, 
consequently, shall have the right to discharge and reload vessels in 
transit, wherever it may be necessary, for repairs or to lighten fbr 


NICARAGUA CANAL. 


59 


restowage, or by reason of any accident which may render it unavoid¬ 
able, without being subject to search, exactions, or taxes of any kind; 
in each case before commencing the operation notice shall be given to 
the nearest customs authority. 

Article 29. The Government shall afford its protection in accord¬ 
ance with the laws ot the Republic to the engineers, contractors, 
employees, and laborers engaged in the preparatory surveys or in the 
works of construction or in operating the canal. 

Article 30. The association shall be exempt from all forced loans 
and military exactions in times of peace and of war. 

The agents and foreign employees shall also be exempt from direct 
taxes, forced loans, and military exactions while they are in the service 
of the canal; but in case they become the owners of real estate, or of 
industrial or mercantile establishments, they shall be subject to the 
direct taxes established by law. 

Article 31. The association may freely bring to the lands which 
have been ceded to it the employees and laborers of any race needed 
for its works and shops; it may also bring in immigrants of any nation¬ 
ality except Asiatics and negroes; and the immigrants, as well as the 
employees and laborers, shall be subject to the laws of the Republic and 
to the regulations of the company. The Government assures them aid 
and protection and the enjoyment of their rights and guaranties under 
the laws and constitution during the time they remain in Costa Rican 
territory. 

Article 32. The Government of Costa Rica guarantees to the asso¬ 
ciation and to its agents under the laws of the country, as it does to 
all other inhabitants, the full enjoyment of the rights and guaranties 
which the constitution and laws concede them. 

On the other hand, the association and its agents are strictly bound 
to respect the laws and regulations ruling in Costa Rica, and especially 
to submit to the judgments of the courts, without claiming in any case 
other rights than those enjoyed by Costa Ricans. 

Article 33. The Government shall establish throughout the line of 
the canal which may lie within Costa Rican territory or on its frontier 
or in waters which belong to it as sole owner or in joint dominion such 
police stations and customs guards as it may deem necessary to main¬ 
tain good order in the region of the canal and to enforce the customs 
laws of the Republic. 

The expenses attending this service, including the cost of buildings, 
salaries, and allowances of employees, transportation of troops, in 
excess of what the Government pays for customs guards now estab¬ 
lished at the mouth of the San Carlos or at any other point crossed by 
the canal, shall be paid into the public treasury by the company upon 
the terms and conditions to be fixed hereafter, taking into considera¬ 
tion the requirements and necessities for such service. 

The association shall have the right at all times to establish guards 
and watchmen for the service of the canal and for the enforcement of 
its regulations. 

Article 34. All contracts for work on the canal which the associa¬ 
tion shall make abroad shall be valid and subsisting and shall have full 
force and effect in Costa Rica, in. so far as they do not conflict with the 
established laws of the Republic. 

Article 35. The association shall be exempt duriug the period of 
this concession, in times of war and of peace, from every form of tax 
upon the real estate acquired by virtue of this contract, and from all 
direct taxes, local imposts, and from all other dues relating to the prop- 


60 


NICARAGUA CANAL. 


erty and to the use of the canal or its buildings, or the constructions 
pertaining to it, throughout its length, including those at the ports and 
the maritime establishments on the two oceans. 

That franchise is not transmissible to the purchasers of real estate 
which the association may sell in conformity with this concession. 

Article 36. The Republic of Costa Rica shall not establish tonnage 
dues, anchorage, pilot, light, or any other charges upon vessels of any 
class whatever, nor upon the merchandise, luggage, and passengers 
which may pass through the canal from one ocean to the other. All 
such rights are reserved to the association as stipulated in article 39. 

Article 37. With the view to secure to persons and property the 
most ample freedom of transit, there shall be on each side of the canal 
a free zone of 90 meters 288 millimeters in width, measured from the 
water’s edge of the canal. 

But within this zone all traffic declared by the laws of the Republic 
to be illegal shall be prohibited, and the customs authorities, empow¬ 
ered to watch and to prevent smuggling, shall act in accordance with 
the stipulations of article 28. 

It is expressly understood that any vessel navigating the canal which 
may be within the territory of Costa Rica, or along the line of its fron¬ 
tier, or in waters over which it has joint sovereignty, shall carry on 
board a guard appointed by the Government whenever the authority 
shall deem it advisable, and that employee shall act in conformity with 
the laws in case of their violation. 

The two ports of entrance and departure to and from the canal on 
either ocean, if wholly or in part within the territory or waters of Costa 
Rica, shall be declared free ports, and shall be recognized as such from 
the time of the opening of the canal to the termination of this concession. 

The Government, conjointly with the company, shall designate by a 
special decree the limits of the free zone, which shall never extend 
beyond the waters of the same port comprised between the mouth of the 
canal and the entrances to the ports. 

Merchandise embarked or discharged at either port of the canal, 
within Costa Rican territory, destined for interior commerce, shall pay 
the import and export duties fixed by the customs laws of the State. 

Article 38. For the proper administration of the canal and its 
dependencies and to facilitate its construction and use, the company 
shall prescribe the necessary regulations, which shall be binding upon 
all persons in the waters of the canal or its dependencies, with the sole 
reservation of the recognition of the rights and sovereignty of the State. 

It is understood that the association in use of the rights conceded in 
this article shall not make any other regulations than such as are 
required for the administration and special management of the canal, 
and that before putting them into force they shall be submitted to the 
approval of the Government. The State shall lend the aid of its author¬ 
ity to enforce these regulations. 

Article 39. By way of compensation for the expenses of surveys, 
construction, preservation, and operation of the whole or a part of the 
canal during the period of this concession, the association shall have 
the right to establish and to receive for the passage of ships and vessels 
of all kinds, of travelers and merchandise, through the canal and in 
the waters and ports pertaining to it, imposts on navigation, tonnage, 
pilotage, towage, storage, lay dues, anchorage, light, and roadstead 
dues, wharfage, for hospitals, and others of a similar character which 
may be established in consonance with article 45 of this contract 


NICARAGUA CANAL. 


61 


These tariffs may be modified by the association at any time, on tlie 
condition that all the modifications introduced therein shall be pre¬ 
viously communicated to the Government, which shall, if found to be 
within the restrictions established by said article 45, cause them to be 
observed as if the regulations were issued by itself. 

The payments of all tariff dues shall be required without any prefer¬ 
ence or exception and under the same conditions from all vessels from 
wheresoever they may come or of whatever nationality, save in reserved 
cases stipulated in the next article. 

Article 4.0. In compensation for the privileges and concessions 
which Costa Bica grants by this contract, it is stipulated that the 
Bepublic shall enjoy the special privilege that Costa Bican vessels, 
sailing under the flag of Costa Bica, shall navigate the canal at a 
reduction of 50 per cent from the general tariff while employed in the 
coasting trade or in the interstate trade with the other Bepublics of 
Central America. 

To enjoy this privilege said vessels must be, indispensably, of the 
matriculation of this Bepublic and must be owned by citizens of the 
same. 

The same rebate of 50 per cent from the general tariff shall also be 
conceded to any vessel outward bound which commences its voyage 
from any of the ports of the Bepublic and whose cargo shall consist 
in its totality of products of the country. 

Costa Bican vessels of war, and those of the revenue service, of the 
Bepublic shall pay no transit dues in passing through the canal, neither 
shall the vessels of national matriculation which navigate in Costa 
Bican waters connected with the canal, and the canal itself, without 
passing the locks, pay dues, but such vessels shall not in any way 
obstruct the expeditious navigation of the canal. 

On the part of Costa Bica there will be no obstacle to the enjoyment 
by Nicaraguan vessels of the advantages granted in this article to 
those of Costa Bica, provided that Nicaragua consents in reciprocity 
that Costa Bican vessels shall enjoy the same advantages in Nicaraguan 
waters. 

All the concessions to which this article refers shall be extended to 
the other Bepublics of Central America, or to any of them, if Costa 
Bica and Nicaragua should be free from international obligations which 
might prevent it, or whenever any one or more of said Bepublics shall 
form with Costa Bica one nation. 

Article 41„ In case it should be possible to utilize the waters of the 
the canal and its dependencies for irrigating plantations, gardens, or 
streets, or for the supply of places requiring water, or as a motive 
power for private enterprises, the company shall have the right to 
supply it and receive compensation therefor, according to the rates 
established conjointly with the Government, proportionally with the 
quantity supplied. 

Article 42. The association shall undertake at its own expense the 
final surveys and tracings of the line of the canal by a commission of 
competent engineers. The Government of Costa Bica shall have the 
right of inspection of the works of the final survey which are being 
made and those already concluded by a competent engineer appointed 
by the said Government, whose salary shall be paid by the association 
and fixed by agreement with the Government. 

For the final surveys of the canal the term of two years and a half, 
counting the date of the ratification of this contract, is conceded to the 


62 


NICARAGUA CANAL. 


association. Within that time the final surveys shall be concluded, the 
company which is to carry out the enterprise shall be organized, and 
work shall commence. 

It is understood that work shall not have commenced if three years 
after it has been undertaken $2,000,000 shall not have been expended 
therein. 

The term mentioned in this article may be extended by the Republic 
at the solicitation of the association if, in the judgment of the Govern¬ 
ment, there should be just motives therefor. 

Article 43. The term of ten years for the construction and com¬ 
pletion of the Maritime Canal and for opening it for traffic is also con¬ 
ceded to the association. 

Notwithstanding, should it be shown that obstacles have arisen suffi¬ 
cient to retard the regular progress of the work during the ten years 
referred to, the term shall be extended to equal in duration the time 
lost in consequence. 

If at the expiration of the ten years before mentioned, the work shall 
not have been completed and maritime communication between the two 
oceans opened, the Republic, in consideration of the large capital the 
association will have invested in the enterprise, and the good faith and 
ability which it shall have shown, and the difficulties it may have to 
encounter, binds itself to concede a new extension. 

Article 44. In guarantee of the fulfillment of the stipulations of 
article 42 the company shall deposit to the order of the Government of 
Costa Rica, in a bank or commercial firm of New York, or with the 
agent named by the Government, and as soon as the certificate shall be 
issued, 1,000 shares of the capital stock, of the nominal value of $100 
each. Said shares shall be considered as advanced to the Government 
in payment of police and customs guard expenses to be incurred in 
accordance with article 33, and the association shall be credited with 
the actual value of the shares at the time of making said payment. 

Article 45. In consideration of the valuable concessions, privileges, 
and exemptions which are granted to the association by virtue of this 
contract, the Republic shall receive in shares, certificates, or other 
securities representing the capital stock of the company a sum equal to 
1^ per cent of the total value of the emission of said capital stock, in 
shares or certificates of the value of $100 each; that sum shall in no 
case be less than $1,500,000. It is understeod that the shares shall be 
fully paid up, two thirds shall not be transferable, and all shall partici 
pate in the profits, interests, divisions, dividends, amortizations, rights, 
privileges, and other advantages pertaining to paid-up shares, without 
any difference. 

These shares, together with the privileges conceded by the associa¬ 
tion to the Government in this contract, shall be in full compensation 
to the Republic for the public lands that may be inundated and for all 
the privileges and concessions granted in this contract, and shall cover 
completely all claims of this class on the part of the State against the 
association or company. 

The shares referred to in this article shall be delivered to the agent 
the Government may appoint for that purpose, as soon as the company 
shall be ready to issue the certificates of its capital stock. 

Article 46. From the gross earnings of the enterprise the company 
shall first reserve a sufficient sum to cover all expenses for the preser¬ 
vation, operation, and administration of the canal; all sums necessary 
to secure the interest debt, the rate of which shall not exceed 6 per 
cent, and for the amortization of its obligations and shares; the remain- 


NICARAGUA CANAL. 


63 


der shall be the net earnings, from which not less than 80 percent shall 
be divided among the stockholders. It is understood that ten years 
after the completion of the canal the company shall never divide among 
the shareholders, by direct or indirect dividends, issue of stock, or in 
any other way, more than 15 per cent annually, or in that proportion, 
for canal dues collected; and when it shall be found that the charges 
yield a larger profit the dues shall be reduced to the basis of 15 per 
cent per aunip. 

Article 47. The present concession shall lapse— 

First. For failure of the company to comply with any of the condi¬ 
tions of articles 7, 42, and 43. 

Second. If the service of the canal after completion should be inter¬ 
rupted for six months, except in fortuitous cases or cases of u force 
majeure.” 

The termination of the contract having been declared for any of 
these causes, the public lands conceded by this contract shall be restored 
to the Republic, in whatever condition they may be found, without 
indemnity. 

Those lands which the company shall have sold with the formalities 
prescribed by law shall be excepted, provided always that such sales 
shall not have been made within the six months previous to the date 
upon which the company becomes lawfully subject to the penalty herein 
established. 

Article 48. At the expiration of the ninety-nine years herein stipu¬ 
lated, or in the event of the lapse of the contract mentioned in the fore¬ 
going article, the Republic shall enter into possession in perpetuity of 
that part of the canal, its warehouses, stations, and other establishments 
used for the administration of the canal, found in the territory of the 
nation. The work found in the waters over which the Republic has 
cosovereignty shall belong to it in joint domain; and in regard to that 
part of the canal and its waters over which Costa Rica has not eminent 
domain, but the right of use and free navigation after ninety-nine years 
or in case of termination, the Republic shall retain the right of use and 
free navigation thereof in perpetuity. For all which the Republic shall 
not be bound to pay any indemnity to the company. 

The vessels of the company, their supplies of coal and other materials, 
mechanic shops, floating and reserved capital are excepted from these 
conditions, as are also at the expiration of the ninety-nine years the 
lands which the State ceded by this contract, excepting those upon 
which the works mentioned in the first part of this article have been 
established, which shall become the property of the State, together 
with their dependencies, as necessary for the service of the canal and 
as an integrant part of the same. 

But in the capacity of lessee the company shall have the right, at the 
expiration of the period of ninety-nine years, to the full enjoyment of 
and free use and control of the canal and of the part within the terri¬ 
tory of Costa Rica, enjoying equally the privileges and advantages of 
this concession during a second period of ninety-nine years, conditional 
with the payment to the Government of Costa Rica of of 1 per cent 
of the net annual earnings of the canal, in addition to the dividends 
accruing from its shares of the capital stock. 

The company shall have the right at its discretion to fix the dues 
(or tolls) referred to in article 39 of this concession in such a manner 
that the stockholders, after deducting the payment of 31J per cent, shall 
still receive 10 per cent annually upon all the capital. 

At the expiration of the second term of ninety-nine years the Gov- 


64 


NICARAGUA CANAL. 


eminent shall enter into the perpetual possession of the canal and of 
other property referred to in the first part of this article, and in addi¬ 
tion all that was excluded from delivery in said first part, with the 
exception of the lots of land ceded to the association by the present 
contract and the reserved capital and sinking fund. 

Failure to fulfill any of the conditions of the lease shall terminate it, 
aud the State shall enter into possession of the canal, or of that part 
which belongs to it because of its being in Costa Rican territory,* and 
of the other works belonging to the canal as stipulated in the foregoing 
paragraph. 

Article 49. Any disagreement which may arise between the Repub¬ 
lic and the company as to the interpretation of the present stipulations 
shall be submitted to a board of arbitrators to be composed of four 
persons, two to be named by the State and two by the company. 

These arbitrators shall be designated by each of the parties within 
four months from the day upon which one of the said parties shall have 
made known to the other in writing the disagreement on the point under 
discussion. 

If one of the parties should allow the period mentioned to pass by it 
shall be held that the opinion or claim of the other has been accepted. 
The majority of the arbitral votes shall decide definitely and without 
appeal. In case of a tie, the arbitrators, by mutual agreement, shall 
name a fifth, who shall decide. If unable to agree in naming a fifth, 
they shall draw by lot ,’’om the names of the diplomatic representatives 
accredited to Costa Rica, and the first drawn shall exercise the functions 
of the fifth arbitrator; he shall adopt the opinion of one or the other 
side, and whatever he decides shall be final and without recourse of 
any kind. 

In default of the fifth arbitrator, the second one drawn shall exercise 
these functions, and so successively until a decision shall have been 
reached. 

Before the commencement of the work of opening the canal the 
Government, jointly with the company, shall adopt rules by which 
the arbitrators shall be governed in whatever relates to their proceed¬ 
ings. 

Questions between the company and individuals residing in Costa 
Rica shall be decided by the ordinary courts, and in conformity with 
the laws of the Republic. In matters of those who do not reside in 
Costa Rica the rules of international law private shall be adhered to. 

Article 50. This contract, when approved by the President of the 
Republic, shall be submitted to the supreme legislative power for its 
ratification if deemed desirable. In case of its rejection the Nicaragua 
Canal Association shall be released of its obligations herein contracted. 
The ratification or rejection shall be given within one hundred and 
twenty days from this date. 

In faith whereof the undersigned sign four copies of the present con¬ 
tract, two lor each party, at San Jose, Costa Rica, July 31,1888. 

P. Perez Zeledon. 

A. G. Menocal. 

This contract was approved the same day by the President of Costa 
Rica, and was ratified by the Costa Rican Congress on the 9th of Au¬ 
gust, 1888. 


*Or at points where Costa Rica has joint rights. 




























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